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May 09 newsletter

Superannuation has been a political football for years. With KiwiSaver and the Cullen Fund, the ball was effectively kicked into touch and the game was over. Well, that’s what some people suggested. But the ball was kicked back into the middle of the park once the new National Government was elected and the game is back on.

There were a number of changes to KiwiSaver that took effect on 1 April 2009. This newsletter will outline the changes. However, despite the changes, the recommendation from the Shape of Money is to continue to invest in KiwiSaver and if you haven’t yet joined, then you are encouraged to join.

What are the changes?

The $1,000 kick-start payment, the member tax credit of up $20 per week and the first home withdrawal provisions all remain unchanged.

However, investors will lose the $40 per annum contribution to fees.

The minimum employee contribution rate has been reduced from 4% to 2%. In addition, the compulsory employer contribution has also been reduced from 4% to 2%. Your employer may contribute more than 2% but they are not obliged to. Additional contributions will now be a matter for normal remuneration negotiations.

What does the Shape of Money recommend?

As noted above, despite the changes, KiwiSaver is still a worthwhile choice for employees and for non-employees who contribute up to $1,040 per annum. Check out the updated KiwiSaver Calculator to work out your potential retirement nest egg. One final point is that if your salary is below $52,000 and your contribution is 2%, you won’t get the maximum $1,040 Government contribution. So we recommend making a voluntary contribution up to $1,040 each year to ensure you get the maximum tax credit.