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Demystifying KiwiSaver: Fact or Fiction
Comment: In the 2009 Budget the Government announced it would axe the mortgage diversion facility from June 1. It had proved complex to implement with fewer than 1000 investors taking up the option.
Demystifying KiwiSaver: Fact or Fiction

By Lyn Bell

KiwiSaver has been with us now since 1 July 2007 and yet mystery still surrounds the scheme for some potential investors. This may partly be because of changes that have occurred, most recently those brought in by the National led Government. So let us look at what is fact and what is fiction.

Here are the facts that actually benefit investors:

� $1,000 kick start is available to all New Zealand who sign up as members of KiwiSaver. This is a one off payment.

� A member tax credit of up to $1,042.86 per year is available to all contributors between the ages of 18 and 65.

� Employed members receive a compulsory contribution of 2% from their employer.

In fact, you�d be surprised by how much of your KiwiSaver savings you don�t contribute yourself!

Is it fact or fiction?

� If I start working I have to start a KiwiSaver scheme. This is fiction. KiwiSaver is a voluntary, work-based savings program to help you with your long-term saving for retirement. You do however have to opt out if you decide not to participate in the scheme. If you become a member while you are unemployed and but then start to work you would then need to contribute 2% of your salary. This would only if you have not been in the scheme for 12 months, as after 12 months you can apply for a contribution holiday.

� I have been contributing to KiwiSaver and can�t afford to continue putting away 4% of my salary as my hours have been reduced and now I�m stuck with 4%. It is fiction that you must continue to contribute 4%. From 1 April 2009 you may apply to reduce the contribution to 2%. And, once again you can apply for a contribution holiday after being a scheme member for 12 months.

� I�m better off to pay money into my mortgage rather than start KiwiSaver. Fiction, unless you are a non-employee and even then the incentives make KiwiSaver contributions better than mortgage repayment. As a non-employee you can still invest $1042 a year and get the full member tax credit but obviously would miss out on an employer contribution. This means you still double your money in to the scheme.

� I retired at age 60 so am not eligible to join. This is fiction as KiwiSaver is available until age 65. Because of the incentives it is a particularly good option for investors in their 50s and 60s.

� You can�t get at your money. Fiction. In certain circumstances you can access part of your funds for such things as financial hardship and serious illness. You can also access funds to purchase your first home and if you leave New Zealand permanently you can apply to withdraw most of your investment after 12 months.

Doubling your savings, receiving a $1,000 to kick start your investment are all good reasons to consider KiwiSaver. In fact speaking to an adviser to help you choose the KiwiSaver Scheme that best suits you, your lifestyle and preferences would be a smart move towards your future security.
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