A number of changes have been made to the government’s KiwiSaver savings scheme.
The changes include:
1. New contribution rates
Two new contribution rates have been added. This means that if you’re employed, you can now choose to contribute 3, 4, 6, 8 or 10 per cent from your pay packet, starting from 1 April.
The two new rates are 6 and 10 per cent.
“Adding more contribution rates gives members more flexibility and control over their saving,” says Peter Cordtz, the acting Retirement Commissioner.
“We’ve had many New Zealanders tell us that the gap between 4 and 8 per cent is too large for those able to contribute more, so they feel stuck on the lower rates,” Cordtz says.
“Others want the ability to save even more for their retirement.”
2. More people can join
People aged over 65 can now join KiwiSaver, and there’s no longer a lock-in period for them.
Previously, there was a lock-in period that meant people over 60 had to remain in the scheme for five years before they could take out their money. Both these changes take effect from 1 July.
3. Name change from ‘contributions holiday’
The name of any break you take from KiwiSaver has been changed too, starting from 1 April. Instead of being called a ‘contributions holiday’, it’s called a ‘savings suspension’.
The Commission for Financial Capability suggested changing the name because it felt the word ‘holiday’ sounded too positive, and the name ‘savings suspension’ would better explain what it was.
When you applied for a break, by default it used to be five years’ long, but now that’s been reduced to just one year.
The commission says in the year ended 31 June 2018, 136,000 members were on a contributions holiday. Almost 84 per cent intended to suspend saving for the whole five years.
“Stopping contributions for five years has a significant impact and disrupts long-term savings,” Cordtz says.
4. Name change to Member Tax Credit
The money you get from the government each year, if you contribute enough, is having a name change and is now called a Government Contribution. It used to be called a Member Tax Credit, or MTC.
Published 25 March 2019
Story by Claire Connell
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