Archive for 'super'

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.

KiwiSaver provider backs compulsory super

New Zealand’s biggest KiwiSaver provider ANZ is backing compulsory super after new research finds that just 53 per cent of New Zealanders who earn less than $50,000 are members of KiwiSaver.

Although the research found that 80 per cent of those surveyed who earned more than $100,000 were KiwiSaver members, many were not regularly contributing to the scheme.

Since KiwiSaver was launched 10 years ago, 2.7 million people had joined, however, 375,000 working-age people have not enrolled in the scheme.

ANZ is proposing that KiwiSaver is made compulsory. If it is not made compulsory, ANZ is suggesting all adult non-members should be automatically enrolled with an option to opt out or a reintroduction of Government incentives to join up.

ANZ said the findings do raise questions about whether KiwiSaver is reaching the people who need it the most. Only 35 per cent of those surveyed said they have calculated how much they will have saved by age 65. A further 37 per cent said there was too much uncertainty and 22 per cent said it was too hard to work it out.

Posted on 14 September '17 by , under super. No Comments.

Accessing KiwiSaver early

Although the main purpose of KiwiSaver is to prepare for retirement; New Zealanders can access their KiwiSaver early under certain circumstances.

KiwiSavers may be able to withdraw all or part of their savings early if they are buying their first home, emigrating, suffering financial hardship or serious illness.

Significant financial hardship and serious illness
Inland Revenue considers significant financial hardship for those:
– who are unable to meet minimum living expenses or mortgage repayments on the home they live in
– modifying their home to meet special needs for themselves or a family member with a disability
– paying for medical treatment for themselves or a dependent family member
– suffering from a serious illness
– incurring funeral costs if a dependent family member dies.

IRD may allow those who are facing serious illness to withdraw the total funds in their KiwiSaver, including the current value of their contributions; employer contributions; the $1,000 kick-start (if they were eligible) and any member tax credits.

Moving overseas permanently
New Zealanders who emigrate to a country other than Australia may be able to withdraw their KiwiSaver savings after being overseas for one year. If you are moving to Australia, you will be able to consolidate your super savings into an Australian complying super scheme or leave your savings in an NZ KiwiSaver scheme.

Purchasing your first home
KiwiSavers (who have been a member for three years) have the opportunity to withdraw some of their savings to put towards purchasing their first home. You may be able to withdraw the current value of your contributions; your employer’s contributions; returns on investment; and any member tax credits. KiwiSavers must leave a minimum of balance of $1,000 in their KiwiSaver account.

Posted on 1 March '17 by , under super. No Comments.

Taking a contributions holiday

Employees who have been a KiwiSaver member for 12 months are allowed to take a ‘break’ from saving or contributing their money to their KiwiSaver account. This is called a contributions holiday.

A contributions holiday is for employees who want a break from making KiwiSaver contributions from their pay.

Employees can only take a contributions holiday if they have been a member for 12 months or more. However, some employees can take an ‘early’ contributions holiday if they’ve been a member for less than 12 months.

If you’ve been a member of KiwiSaver for 12 months or more, you can take a contributions holiday of between three months and five years. In some cases, Inland Revenue may agree to a holiday of less than three months. There is no limit to the number of times you can take a contributions holiday and you can renew it at any time.

You can restart your contributions while you’re on a contributions holiday by asking your employer to begin making deductions again. You can start or stop your contributions at any time during your contributions holiday but if the change is within three months of the last change, your employer needs to agree.

Your employer will be required to begin compulsory employer contributions again when you restart the contributions from your pay. You will also be entitled to the member tax credit.

Inland Revenue will only consider an early contributions holiday where a person is experiencing, or likely to experience, financial hardship. The person will need to provide evidence of financial hardship for reasons outside of their control to support their application.

If a person’s financial circumstances have changed for reasons within their control or discretion, Inland Revenue may not accept the application.

While taking a contributions holiday, a person’s employer is not required to make compulsory employer contributions. The employee can also still make voluntary contributions.

Posted on 1 February '17 by , under super. No Comments.