Kiwisaver: may not let you say no.
Filed under: Cost of living, Property & General Investing, Retirement, Pensions and Kiwisaver
It seems discussions are underway to “auto enroll” the million workers who have not yet done as they were supposed to do and enrolled in Kiwisaver. Now if you start a new job, you are automatically enrolled, and you have to opt out: that takes time, and in that time you lose a % of your salary until such time as the IRD give it back.
But for the million people who have not signed up voluntarily, and have not changed jobs so been swept up in the automatic enrollment – apparently – that’s not what you were supposed to do – and time could be up to behave and do as you are told!
Sometimes I do wonder how we can possibly be allowed to make any of our own choices anymore.
It is one thing to make Kiwisaver compulsory – and I personally object to being forced to invest in a way I do not want to, but its another to sit there pretending you have choice in the matter, and then clubbing you round the head with a big stick cos you didn’t make the “authorised” choice.
I get that many people are not savvy about investing. Hell, even those of us that think we are, probably aren’t. But should you be forced to put your money in an investment you think is a really bad one? Clearly a lot of the people not enrolled are there because they just didn’t bother. Many of them may not mind being auto-enrolled. But at a time when the cost of food and fuel are rocketing should we really be saying that you now have to work through the process of opting-out in order to not lose 3%+ of your wages?
There are 1.75 million people in KiwiSaver now but another 250,000 have opted out of the scheme.
But it is likely the opt-out rate would be much higher under an auto-enrolment plan, perhaps as high as 40 per cent to 50 per cent.
“The Government is looking at how we can auto-enrol those people who are in the workforce but currently not in KiwiSaver,” he said. The Government’s Savings Working Group had looked at compulsion but had shied away.
“They rejected it on the basis that it wouldn’t necessarily suit every person’s circumstances. Low-income people might find it quite challenging to go in there . . .” Mr Key said.
I am also a bit tired of the belief that only low income people are affected by losing a % of thier salary. When the kiwsaver contribution was 4%, it would have cost us over $500 a month to enroll. We could not afford to lose that. And bear in mind that with a lot of companies, you also need to fund the employer’s contribtion out of you salary (how the hell is that legal???) you can be stuffed!
Enrolling more people in the scheme may not lift national savings, because they may save less in other areas.
Saving what I wonder?
Labour leader Phil Goff said his party was looking at ways to create a more “universal savings scheme”, but he refused to give details.
KiwiSaver had been universally available, but not universally taken up, he said.
There were problems extending it to everyone, because many people did not have spare cash to put into savings.
“There are a whole lot of New Zealanders that are struggling just to meet the day-to-day bills, that actually don’t have the ability to put money aside for savings.”
I actually think that may the first time I have agreed with what Phil Goff says.
New Kiwisaver Rules: what the hell?
Accepting that I am not a fan of Kiwisaver – I am a little bit gobsmacked about new rules that the government have brought out, ensuring that Kiwisaver Providers:
are to have a direct duty of care to their investors and will have to provide regular updates on their investment performance, fees and asset allocation.
Ummm – you mean they don’t currently have to do this?
Thats outrageous! After all the problems that people have had in the last year or two losing all their money, a new scheme didn’t write in these rules in the first place?
It seems there is currently about $5bn invested in Kiwisaver funds. Thats a helluva lot of money that people have put into the hands of providers when it seems they don’t have a duty of care to the people investing with them. And it doesn’t say much for them them this had to be written into law, rather than them just behaving properly off their own backs.
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Kiwisaver Problems: keep your eye on your provider.
Filed under: Avalon's Money Thread, Cost of living, General Budgeting, Property & General Investing, Retirement, Pensions and Kiwisaver
I always thought putting the Inland Revenue in charge of Kiwisaver was a daft idea. Seems I may have had a point. The IRD passes on your information to one of the default providers, and then thats the end of what they care about. It seems that a lot of the default Kiwisaver providers (these are the ones you are automatically enrolled with if you don’t make your own choice), have got the wrong information, and cant get in contact with the people whose funds they are running.
It worries me that there appears to be an awful lot of people who are completely unaware that they have a Kiwisaver fund. There are 200,000 people who cannot be contacted by their fund managers.
The problem means people may not receive the letter telling them who their KiwiSaver provider is or the annual statement on their Kiwisaver balance and annual report explaining the returns of their fund.
McAllister [from ASB Group Investments - the larges Default provider] said some people could be in KiwiSaver for more than a year and still not know because it was new and they did not know what to expect from their provider or Inland Revenue.
“It appears it’s an IRD problem. It raises questions about how accurate IRD’s information is.
You need to be aware about Kiwisaver. You are automatically enrolled into a fund, whether you like it or not, and have to opt out if like us you think Kiwisaver is crap.
Make sure you understand what is at stake here – as immigrants you will face this the minute you start a job,a dn you have 2 weeks to make up your mind about staying in Kiwisaver forever or opting out. Do your homework.
More information on Kiwisaver can be found in Avalon’s Guide: 13 things you need to know, and 17 things you really need to know!
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Avalon’s Guide is now on sale
After much angst, nail biting and way more research into Kiwisaver and tax than is healthy for any mere mortal – Avalon’s Guide: Emigrate to New Zealand is now available.
Thank you to New Zealand for allowing me to live here and write a book about it – and for having the worlds best Baristas* who supplied me with vast quantities of coffee while writing it.
To buy now
Please visit Avalon’s Guide.Com
(Orders are handled through Paypal, so please be assured that your order is safe, and you do not have to let me run riot with your Credit Card Number.)
What if you are NOT in fact going to emigrate to New Zealand???
Buy the book anyway – there is a lot of useful information in there about how to manage your money, no matter what country you live in!
You can download the Introduction and Contents page if you want to have a nosey before parting with any cash. There are some a few other helpful links on there.
*No Barista was harmed in the making of this book.
Kiwisaver Changes – Arggghhhh
Filed under: General Budgeting, Jobs & Work, Life in New Zealand, Property & General Investing, Retirement, Pensions and Kiwisaver, The Book and Website
I’m so glad that I made a disclaimer in my book about the need to be aware of things like taxes changing –it seems- at the drop of a hat right now.
No sooner had I agreed on the final edit of the book – Wham – the new government brings in new Tax Rates – and even worse – new Kiwisaver rules.
So – what is the deal – and what does it mean for everyone who lives or wants to live in New Zealand.
Firstly Kiwisaver. As of April 2009 – you will be able to contribute a minimum of 2% of your gross salary, instead of the current minimum of 4%. For many people – this is actually good news – as it means you will not be losing 5.6% of your take home pay if you want to join Kiwisaver. You still lose more than 2% – but hey – it’s going in the right direction for some people. It should actually mean that more people choose to join Kiwisaver because it won’t now hit their pockets so much. As someone who was new to saving money for the future – it is a big hit to lose 5%+ of your pay cheque.
(You can read “What Is Kiwisaver” in Avalon’s Guide to find out about how much you really pay into Kiwisaver).
On the other hand – this now means that people need to earn a minimum of $52,000 a year in order to be able to contribute 2% of their salary and still get the Maximum $20 a week tax credit. Under the old rules – People earning just $26,000 a year would get the maximum as 4% of $26,000 gives the same weekly contribution as 2% of $52,000.
However – the government has said that it will match any contributions for people affected by this on a $ for $ basis. This means that someone earning $26,000 and contributing 2% will be paying $10 a week into Kiwisaver. They will only get $10 a week tax credit from the government. So the government has now said (if I’ve read the very boring blurb correctly), that if the person earning $26,000 chooses to pay more than 2% – the government will also pay more – up to the maximum of $1043 a year.
On the other hand – the new rules also mean you lose the $40 a year fee subsidy, so now you have to pay all your fees yourself. Do make sure you read the (usually rather dull) investment statement you should get when you are looking at providers to find out how much you have to stump up. I actually don’t think the $40 would make a huge difference anyway.
Also, employer’s mandatory contributions are now topped at 2%, and they lose their $20 a week tax credit to help fund it.
So – why are these changes happening? Well, it appears that when you look at who joins Kiwisaver – there is a huge difference in take up when you hit the $50,000 salary bracket – with people earning less than that not joining. These changes are designed to encourage people earning less than that to join up by not requiring them to lose as much of their take home pay. I know I have friends who would join – but felt that they could not manage that kind of contribution. Some financial advisors have found the same with their clients.
It should in theory allow lower income workers to start saving something – which has to be better than having no savings at all. Time will tell if this really works.
Bear in mind that all the calculators do not show these new rates yet, and that you can still choose to contribute 4% or 8% of you wish.
I’ll save the Tax Rate changes for another Blog – too much in one can hit might have you all running away screaming.
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