KiwiSaver as a DHB employee

As you are aware Kiwisaver can be part or all of your DHB subsidy. The absolute majority of doctors who I deal with in Kiwisaver are in it on a splitting basis with superannuation.

Contribution levels

These are fixed at either 3%, 4% or 8% of your gross income. No other figure is possible. If you wish to save additional monies super offers flexibility here in that you can save any amount. Note that if you are only in Kiwisaver and wish to pick up the 6% gross DHB subsidy you need to save 8% as 6% is not an option.

Access

Standard features for access for both super and Kiwisaver include death, permanent disablement and financial hardship.

Funds can be accessed from Kiwisaver other than these in two circumstances:

  • If you haven’t purchased your first home once you have been a member for 3 years and made 3 years contributions you can withdraw both your and the employer contributions towards your deposit.
  • Once you reach the age of eligibility for NZ Super (currently 65) your funds are available. Of course the government decides on this age which needs to increase over time due to the demographics.

Government benefits

Currently when you enrol in Kiwisaver the government deposits a one off lump sum of $1,000. In addition if you contribute at least $1,042/yr the government will add a tax credit annually of $521. This means at a 3% contribution rate you need to be earning a minimum of $34,733 gross per year. If you have additional self employment income and are not set up for PAYE, you can invest the $1,042 annually and pick up the tax credit. Note The Kiwisaver tax credit year runs from 1 July to 30 June each year. In the first year of membership you will only receive a proportionate amount of tax credit based on what time of the year your $1,042 investment was made. This is not an issue in subsequent years.

Changing providers

It is easy to change providers. All you need to do is complete an application for the new scheme and the rest is taken care of.

Opt out process

Should you not wish to join Kiwisaver you need to opt out within the first 8 weeks of joining a new employer (note you cannot opt out in the first two weeks, however deductions over this time will be refunded).  Opting out needs to be exercised each time you start with a new employer. Of course if you join Kiwisaver it will follow you around (like a loyal dog) employers without the need to re join.

Contribution holiday

If you wish to stop contributing to Kiwisaver for a period of time (up to five years at a time) you can, once you have contributed for a year.  Should you wish or need to, contribution holidays can be rolled over every 5 years. The process for a contribution holiday is to complete a contribution holiday form (KS6 obtained from www.kiwisaver.govt.nz ) and send it to the IRD. Once they have replied and confirmed this, forward their confirmation to your payroll.

The future

One thing (and this would be my biggest criticism of Kiwisaver) you can be guaranteed about Kiwisaver is that it will be constantly changing. The reason for this is that the government make the rules. Since it was created in 2007 there have been numerous changes (without going into the details).  You will no doubt be aware that if Labour is the government after the September election there will be further changes (compulsion, increase in contribution rates, ability for the Reserve Bank to increase contribution rates as a monetary policy tool and finally a likely increase in the retirement age (which I agree with).

Conclusion

Kiwisaver is here for good. It can be a useful part of your retirement savings mix. The key is to understand its nuiances so it can work to your best advantage.