Archive for 'super'

KiwiSaver investors should stay calm after market drop

The Retirement Commissioner Diana Maxwell has urged KiwiSavers to remain calm after the steep decline in world share markets has affected savings.

The NZX-50 Index dropped 3.65 per cent on 11th October and had since slowly edged up by 1.17 per cent.

Maxwell urged KiwiSaver investors to remain calm and refrain from meddling with their funds. She advised that any long-term investment will fluctuate but riding out economic downturn is the best option and your balance will inevitably rise.

You should avoid switching funds, providers or suspending your super contributions as the fees or decline in the growth of your investment will not be worth it once the market’s rough patch ceases. Maxwell advised that the KiwiSaver banking apps are fantastic in tracking growth, but investors should avoid watching the apps too closely to prevent panic at small changes in the market.

However, if you are more risk averse and changes in the market provoke anxiety, consider changing your super risk profile to something more conservative.

Posted on 26 October '18 by , under super. No Comments.

Divorce and your KiwiSaver

Going through a divorce is an extremely difficult experience; among the emotional challenges are the financial issues, particularly when you consider what will happen to your KiwiSaver?

The good news is the balance in your KiwiSaver prior to the relationship is safe and will not be divided between you and your partner when you divorce. However, the amount in funds contributed, and the growth incurred in your KiwiSaver during the relationship falls under the category of relationship property and as such is to be divided equally amongst a divorcing couple.

Regardless of whether the value is made from government contributions, employer contributions or individual contributions, it will still be categorised as relationship property and divided appropriately. The value of your KiwiSaver (to be divided) will usually be at the date you and your partner separate or the date of resolution.

Generally, the Court will order your KiwiSaver fund to pay out a portion of your funds to your partner’s bank account or KiwiSaver unless there is another option available. For instance, you and your partner may agree that he or she will take a larger share from the relationship’s other financial assets instead of from your KiwiSaver.

It is also important to know if full disclosure is not given during the divorce settlement in relation to your assets, your former spouse will have the option to take proceedings against you.

Posted on 29 August '18 by , under super. No Comments.

KiwiSaver for new employees: what you need to know

Upon hiring a new employee, there is a range of obligations and responsibilities you will have to meet when it comes to KiwiSaver.

Start the enrolment process
Firstly, you will be required to check whether they are eligible to join KiwiSaver. The employee needs to be enrolled in KiwiSaver (providing they are eligible for automatic enrolment) unless you offer an approved alternative superannuation scheme.

You must provide every new employee with KiwiSaver information (KS3), including a KiwiSaver deduction form (KS2) and an Opt out request (KS10) form. Ensure you keep a copy of the KS2 form for your records. If your employee does not complete the KS2 form, you can apply the default rate of 3 per cent.

Should you have an employer-chosen KiwiSaver scheme, you will be required to confirm this in writing for the new employee explaining that you have chosen a scheme they will be allocated to unless they choose their own scheme. You will need to provide them with your scheme’s investment statement as well.

First pay
Once they begin their job, you must make KiwiSaver deductions from the employee’s first pay until:
– The opt out notice takes effect.
– They no longer receive a salary or wage.
– Their contributions holiday is granted.
– The IRD notifies you to stop making deductions.
– The employee is eligible to and withdraws their savings.

New employees who have been automatically enrolled in KiwiSaver can opt out anytime on or after day 14 and on or before day 56 after starting their new position.

Employer superannuation tax (ESCT)
Generally, an employer superannuation tax (ESCT) will be deducted from the contributions you send to the employee’s KiwiSaver or super account. You must contribute at a minimum 3 per cent of their salary or wage.

Provide employee details
When they should be automatically enrolled, provide IRD with your employee’s full name, IRD number and address via a KiwiSaver employee details (KS1) form (you only need to give the information that the employee gives you).

This must be provided no later than the date for providing the IR348 or EI that corresponds to the employee’s first pay.

When they are an existing member
If your new employee is already enrolled in KiwiSaver, they must give you a:
– KiwiSaver deduction form (KS2),
– or a valid KiwiSaver contributions holiday request (KS6)

Usually, you will not have to send a KS1 for a new employee that is an existing member.

Posted on 3 August '18 by , under super. No Comments.

KiwiSaver mistakes

If you have joined KiwiSaver, you are already heading in the right direction towards building a steady nest egg. However, joining KiwiSaver without much consideration of your type of fund or investment goals can be detrimental to your final retirement balance.

Here are three KiwiSaver mistakes to avoid:

Choosing the wrong fund
Sticking with your default fund is one of the biggest mistakes you can make with KiwiSaver. Many Kiwis do not realise they can change funds to better suit their age, investment goals and experience. It’s a good idea to check the fees and performance of your current fund and weigh them up against your investment risk and time frame.

Not contributing enough
Taking too many contribution holidays (where you stop making contributions to your KiwiSaver) may be convenient for you at the time but it can make a substantial difference to your savings in the long run. Try to avoid taking contribution holidays and instead keep your contributions consistent and realistic for your budget and financial goals.

Withdrawing funds
Applying for significant financial hardship to pay off your credit cards is a big no-no. Many think KiwiSaver is easily accessible. Yes, you can apply for significant financial hardship but the IRD makes it clear to do so you must be unable to meet minimum living expenses or mortgage repayments, modifying your home for a dependent family member with a disability, suffering from a serious illness, incurring funeral costs, or paying for medical treatment for a dependent family member.

Posted on 11 May '18 by , under super. No Comments.

The in’s and out’s of asset allocation

Deciding where to allocate your assets can be confusing and even daunting, particularly if you aren’t confident in your knowledge of the current financial sphere.

Consider the following in’s and out’s of asset allocation to make the process much easier:

Set goals

Goal-setting is extremely important, particularly when it comes to your money. When deciding where to allocate assets, you should set both short-term and long-term goals. If you are planning to save for a vacation or a new car, this would be a short-term goal, a mortgage would be a medium-term goal and your nest egg would be a long-term financial goal. The goals you set should be SMART; specific, measurable, achievable, realistic and timely. You should also revisit your SMART goals and assess how well you are doing, thus allowing you to make appropriate adjustments if need be.

Risks

The more open an individual is to risk, the greater the opportunities for where they allocate their assets. If an individual is open to investing in higher-risk assets, they can consider options such as investing in shares. If they are more attracted to low-risk assets, options such as a term deposit are more suitable.

Speak to a professional

If you make it known to friends and family that you are deciding where to allocate your assets, you will become inundated with tips and advice of what and where you need to invest. This can become overwhelming and more of a hindrance than a help. The best person you can talk to is a professional you trust, such as your financial advisor. They will be able to give you all the information you need, they will be able to answer all your questions, and they will be unbiased.

Posted on 16 March '18 by , under super. No Comments.

Making the most of share market volatility

When share markets drop, it is not uncommon for investors to feel threatened and anxious about their investments.

Luckily, there are strategies you can adopt when share markets fluctuate, in order to use the volatility to your advantage. Consider the following:

Patience

One of the greatest tools you can have when it comes to investing, in any market, is patience. Many investors react when there’s market volatility and start shifting their money and pulling their investments, ultimately resulting in them losing their money. You need to be patient and understand that the nature of share markets is for them to move up and down.

Diversify

Diversifying your portfolio as an investor is always a smart strategy. Putting all your eggs in one basket is extremely risky, as you’re either going to succeed or fail. When you diversify and invest in a range of different areas, you are more likely to be protected in times of volatility.

Professional advice

Having confidence in your investment strategy is always easier when you have backing from a financial expert. When feeling anxious about your portfolio, you should never hesitate to speak to your financial advisor.

Posted on 16 February '18 by , under super. No Comments.

Secrets to a savvy SMSF

Opting for a self-managed super fund (SMSF) can be a clever financial decision, but it’s not for everyone.

If you aren’t prepared to adhere to the following tips, your SMSF will most likely fail to perform as well as you would of hoped it to.

Stay informed
You can’t expect your SMSF balance to be the most profitable for you in your retirement phase if you don’t remain educated on the vastly changing compliance laws. Remaining up-to-date with these changes, and how they impact upon your nest egg is an essential aspect of making your SMSF work for you, your spouse and your children.

Strategy
The ultimate long-term goal of your SMSF is to allow you to retire comfortably, maintaining the life you have become accustomed to throughout your working years. To do this, you need to have a strategy; the decisions you make regarding your SMSF should be part of this strategy, not just transfers here and there because your financial advisor told you to. Your strategy should be reviewed at least annually. You need to be aware of how each decision will impact upon and ultimately lead you towards the financial security you work so hard to achieve for your later years.

Seek advice
Running a self-managed super fund doesn’t involve having all the answers, but it does require understanding when it’s time to talk to a professional to get the best advice on your SMSF. You can never ask too many questions when it comes to your future financial security.

Posted on 17 January '18 by , under super. No Comments.

NZ Super and Veteran’s Pension recipients and overseas travel

For those who receive NZ Super or the Veteran’s Pension, travelling overseas may have implications on these payments.

If you travel overseas for more than 26 weeks and are not residing in an overseas country, you will need to pay New Zealand tax on the payments receive, provided you receive one of the two payments without tax deducted prior to your travels.

To do this correctly and remain compliant under regulations stipulating by the Inland Revenue Department, you will need to file an Individual tax return (IR3) as you have received income that has not been taxed at source. This income will need to be included in the ‘overseas income’ box in the return. Certain circumstances may mean you will also need to make provisional tax payments.

If you receive NZ Super or the Veteran’s Pension and meet the conditions above, you can file online or request a paper copy of the IR3 if you don’t receive one by the end of May from the IRD.

Posted on 7 December '17 by , under super. No Comments.

Finding the best KiwiSaver fund for employees

Since an employee’s retirement savings outcome is ultimately impacted by decisions made today, some employers may feel the need to help their employee’s find a fund that best suits their financial situation.

It is more than likely that the majority of employees respond to this challenge by simply choosing one at random. For employees that avoid making this decision, the Inland Revenue Department usually assigns a fund at random for them.

The number of New Zealanders who enrol in some kind of KiwiSaver fund is growing at a rapid pace. And with almost two hundred KiwiSaver funds currently on offer, it can often feel like quite an overwhelming task to choose a fund that not only fits an individual’s circumstances but is also easy keep track of.

There are many kinds of KiwiSaver fund options to choose from, with returns from funds ranging from under three per cent to over 20 per cent p.a. Some funds are even as much as ten times more expensive than others.

Therefore, it is important that employee’s choose the right fund to avoid missing out on increasing their potential. For example, an employee may be on a $60K salary, contributing the minimum 3 per cent to a KiwiSaver fund and have a matching contribution from their employer.

If they choose a KiwiSaver fund that earns five per cent p.a., they will have a balance of around $340,000 by the time they retire. Alternatively, if they were in a fund that earned eight per cent p.a., their balance at retirement would be around $675,000. This significant increase is a result of just a three per cent p.a. difference.

To avoid ending up in a ‘default’ fund, employees need to know what to look for, what is relevant to them as an individual and avoid being influenced by those who receive commissions from providers. Even though there is a range of different fund types to choose from, there is only a handful of concepts that can determine the best outcomes for an employee.

The length of time before employees can or need to access their KiwiSaver balance determines how long their savings will be invested. Understanding this can help narrow down the type of funds to choose from.

For example, a 25-year-old employee may work for another 40 years before accessing their savings. The employee may be able to invest in a fund that has a larger allocation to growth assets. However, if they require funds for a first home withdrawal, their investment timeframe may be only a year, rather than 40. If this is the case, choosing a conservative fund may be the better option.

Employees should also base their decision on a fund’s characteristics and how well it is managed. Funds can be ‘actively’ managed, or ‘passively’ managed. Some may charge ‘performance’ fees, ‘exit’ fees or other special fees and costs.

While finding the right KiwiSaver fund for an employee can be time-consuming process, it is a worthwhile exercise since long-term returns can be quite substantial.

Posted on 15 November '17 by , under super. No Comments.

KiwiSaver continues to grow

Since KiwiSaver started ten years ago, KiwiSaver members have built up total assets of more than $40 billion dollars and 2.7 million New Zealanders have joined the scheme, according to the FMA’s annual KiwiSaver report 2017.

Based on returns as at 31 March 2017, total assets were up $7 billion from $33.8 billion in 2016. Investment returns of $2.7 billion were more than double those of 2016.

For the second year running, the number of transfers (between providers) is higher than new members joining the scheme.

The FMA’s findings raise alert for the number of default KiwiSaver providers who are not meeting their responsibilities in terms of addressing the financial literacy of members. The FMA has written to the chief executive of each default provider to address this.

From March 2018, KiwiSaver providers will need to show the dollar amount of fees paid on a member’s annual statement. The change comes to help members better understand their fees.

Posted on 13 October '17 by , under super. No Comments.