It has been some time since the last changes to the structure of KiwiSaver, and it is great to see the following proposed changes making their way through the legislative system.
These are still in Bill stage, but it is anticipated that they will be passed, it is expected that the final reading will be February/March 2019and the changes will come into force on 1st April 2019 and 1st July 2019:
- Additional Employee Contribution options of 6% and 10%
- Contribution Holidays changes
- More options for over 60’s
1. Additional Employee Contribution options of 6% and 10% (1st April 2019)
At the inception of KiwiSaver, the contribution options were 4% and 8%, and any amount that members wanted to voluntarily contribute. Since then, the option of 3% has been added, and this is the default contribution for any new member of KiwiSaver.
For members who aren’t paid through PAYE, the optimal contribution rate to KiwiSaver is $87.00 a month (this entitles you to the $43 a month Member Tax Credit from the Government for each month of the year to 30th June that you have been a member and contributed the equivalent of that amount.) This can be contributed as $1,043 a year or any other combination.
As KiwiSaver has become more established, members can see the value of contributing more to their KiwiSaver. This can currently be achieved by adding on a voluntary dollar contribution on top of the % of your salary, but not many people are aware of this option.
Therefore, the additional options of 6% and 10% make it easier for people to save for their retirement.
2. Contribution Holiday changes (1st April 2019)
Change of name – contribution holidays will be renamed ‘savings suspension’ to remove the positive connotations associated with the word ‘holiday’
Change of time period. At present, a contributions holiday can be in place for 5 years, and the maximum time period will be reduced to 1 year. However, members can roll this holiday over, but it will have to be a conscious choice every year. The goal is to get people involved with their KiwiSaver and start making active decisions.
3. More options for people over 60 (1st July 2019)
At present, the maximum age that people can join KiwiSaver is age 65 (the age of entitlement for NZ Superannuation). This will be changed, so that people over age 65 can join KiwiSaver, which will give them additional managed fund choice during their retirement. This is important, as since the launch of KiwiSaver, other non KiwiSaver managed funds have dwindled to a handful of options. This provides a wider range of investment options to retirees.
People joining KiwiSaver from 1st July 2019 will not have a lock-in period. All new members will be able to withdraw their funds from their 65th birthday. Since the launch of KiwiSaver, if someone joins KiwiSaver after the age of 60 – their funds are locked in for 5 years. However, note, that people who join KiwiSaver before 1st July 2019 will still have the 5 year lock in period.
4. Changes to the KiwiSaver HomeStart grant and Welcome Home Loan house price caps for new builds (18 December 2018)
The Government has announced a change to the KiwiSaver HomeStart grant and Welcome Home Loan house price caps for new properties for the ‘Rest of New Zealand’. This change increases the house price cap to $500,000 for new properties for all areas of New Zealand outside of Auckland, Queenstown, Greater Wellington, Greater Christchurch, Hamilton, Greater Tauranga and Nelson/Tasman. New properties are defined as dwellings that receive building code compliance certification less than six months before the date of the home buyer’s HomeStart Grant application.
Aligning the HomeStart, Welcome Home Loan and KiwiBuild house price caps will help support the sale of KiwiBuild homes, make administration simpler for buyers and align the caps more closely with development costs in each region.
House price caps for new properties in the areas listed above are unaffected by this change. These areas listed above already have a house price cap of either $550,000 or $650,000.
House price caps for existing properties for all areas are also not affected.
What does this mean for existing HomeStart pre-approval?
Any existing pre-approved KiwiSaver HomeStart grants will remain valid until the pre-approval expiry date. From today, these clients are able to consider purchasing a home within the new house price caps.
However, once the pre-approval has expired and if a property hasn’t been purchased, a new pre-approval application will be required.
This website is operated by Moneyworks NZ Ltd and is not endorsed by, or affiliated with, the New Zealand government or Inland Revenue. Moneyworks NZ Ltd is using the KiwiSaver trade mark and logo under licence from Inland Revenue. To view the official New Zealand government KiwiSaver website, please click Here