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Listing all posts with label KiwiSaver. Show all posts.
  1. This is a reminder for those with KiwiSaver that the minimum contribution rate for employers and employees will increase from 2% to 3% of gross salary or wages.  This is due to take effect from the first pay period starting on or after 1 April 2013.

    While the change was announced a couple of years ago you may well have forgotten that it was happening. You won't have to do anything as your employer will make any necessary adjustments.

    If the increase in contributions from your pay isn't within your means you do have the option of taking a contribution holiday.  Contribution holidays are between three months and five years and are available to those who have been in KiwiSaver 12 months or more.  Remember that your employer must also increase their payments to 3% so if you can keep it going it’s well worth it – like a salary increase!

    If you are self employed and a non salaried KiwiSaver member you can continue to contribute the same amounts as you did before.  That’s entirely up to you.
     
  2. When it comes to retirement planning, don’t bet the house on it.
    gingerbread house

    “You can’t eat your house” sums up an all too common quandary for a number of retired people in New Zealand.
     
    These folk have paid off their mortgages but at the same time are finding it tough to get by without the regular income that sustained them through their working lives. They discover they’re cash poor, though quite well off in a property owning sense. But edible dwellings, like the gingerbread house discovered by Hansel and Gretel, are indeed the foodstuff of storybooks.
     
    Owning one’s home is an important and worthy goal, and yes, for many of us our residence usually does end up being our largest asset. But the point here is that there are dangers in building a savings strategy solely around the family home.
     
    A New Zealand Treasury study, released back in 2007 prior to the launch of KiwiSaver, highlighted this situation.
     
    It found that the family home accounted for about 70 percent of the wealth of the average New Zealand household. Many families viewed this as a substitute for saving. Once retired, they planned to downsize their home, which they hoped would give them a lump sum they could then invest to generate extra income.
     
    But the study reported that the effect of doing this is “modest; it is only noticeable when households halve the size of their home." So… if this is your strategy and you live in a house worth $700,000 now, be prepared to move to a dwelling valued at $350,000 in order to free up the necessary capital.
     
    In fact, the study prompted the architect of KiwiSaver, former Finance Minister Michael Cullen to say: “This is a timely reminder for many New Zealanders to think beyond their investment in the family home if they are to secure their retirement dreams.” (Refer)
     
    Another pitfall is the lack of diversification that results in a ‘home alone’ investment approach. The first rule of Investment 101 is always: spread your risk.
     
    Remember, the real estate market is just another type of market. It has been subject to downturns in the past and it will be again. Have you really spread your risk if as much as 70 percent of your wealth is tied up in a single asset within a single market?
     
    It’s also worth remembering the costs of investing in a home. Many homeowners look at the price they get when they sell a house, subtract what they paid for it and think… “Haven’t I done well!” They forget the interest costs of a long-term mortgage, rates, insurance, maintenance, renovations… the amount paid to live in a house can sometimes outstrip the so-called profit made when the house is sold. 
    So what’s the best path to take?
     
    By all means, invest in your own home, but don’t let it become the only string to your retirement savings bow. Being involved in a retirement savings scheme such as KiwiSaver is an effective way to diversify your investments.



  3. There are three main changes to KiwiSaver to be implemented progressively:

    1. The maximum Member Tax Credit (MTC) will be halved from $1 to 50c for every dollar a member contributes, up to a maximum of $521 per annum. To be eligible to receive the maximum MTC ($521.43 per annum) you still need to contribute $1,042.86 per annum.

    This change will relate to your contributions made from 30 June 2011 onwards, but because the MTC is paid annually in arrears, you will not receive the new MTC amount until after 30 June 2012.

    1. Currently, contributions up to 2% from employers are exempt from Employer Superannuation Contribution Tax (ESCT). From 1 April 2012, all contributions from your employer will be subject to ESCT at your marginal tax rate.
    2. From 1 April 2013, it is proposed that the minimum employee and employer contributions will rise from 2% to 3%.

  4. In a pre-budget speech the Prime Minister, John Key, spoke of reducing the KiwiSaver Member Tax Credits but retaining the $1,000 Kick Start.  KiwiSaver members and employees would be expected to contribute more rather than relying on the Member Tax Credits which are up to $1042.86 ($20 a week) each year.  These are paid by the Government to the individual’s scheme.

     “None of the changes we will be making will affect people before the election so New Zealanders will be voting with all the information they need and can make their own choices”.

    The Working for Families programme and the student loan scheme are all set for a trim in the May 19 Budget.  The Budget would contain “significant savings, but will by no means be a slash and burn Budget.”

    The student loan scheme would also be in for adjustment but would remain interest-free.

    "The changes we are making in the budget will make all of these programmes more affordable and ensure they survive into the future," Mr Key stated. 

AFA

As an Authorised Financial Adviser in Christchurch Lyn Bell has passed the requirements of the Financial Markets Authority and is legally qualified to provide financial services to her clients throughout New Zealand.  

Lyn’s registration can be viewed at www.fspr.govt.nz. Lyn can also be found at the Financial Markets Authority website.

A disclosure statement is available free on request

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While every care has been taken to supply accurate information, errors and omissions may occur. Accordingly, Lyn Bell & Associates accepts no responsibility for any loss caused as a result of any person relying on the information supplied.