The Chief Economist of the Financial Markets Authority (FMA) says he can also think of plenty of things he’d rather do on a weekend than review his annual KiwiSaver statement but it’s too important for people to ignore.
“If I could jump into their home on a Sunday afternoon and get [people] to do one thing, it’d be to spend 10 minutes reading the statement,” Stuart Johnson told interest.co.nz on Wednesday.
KiwiSaver annual statement season has rolled around, which means KiwiSaver members will either start receiving, or have received, an annual statement from their KiwiSaver provider.
These annual statements show – among other information – the contributions, balance, investment returns and fees of every KiwiSaver member in the July 1 to June 30 year.
Johnson says KiwiSaver makes up an important part of retirement income and people need to take the time to review their annual statements, as they’ll benefit in the long-term.
His key advice when it comes to looking over your annual KiwiSaver statement is seeing how much money you currently have in the scheme.
From there, it’s looking at the projections of what you’re going to get at retirement – and what that’s going to translate to as a weekly payment or figure.
Many people retire at the age of 65 in New Zealand as that’s when they’re able to access both their KiwiSaver and the NZ Super.
“Try and use that information to think about what your target retirement date is,” he says.
After that’s been mulled over, according to Johnson the next step is to see if you’re getting a good deal out of your KiwiSaver. The way to measure that is through the KiwiSaver fees.
“A really good thing about the statement is that it shows you exactly in dollar terms what you're paying in fees. What we're really interested in here is consumers getting a good deal,” he says.
“So that's going to be different for different people. I always like to think about total returns and we would think about total returns as returns minus fee. And that should give you an idea of whether your KiwiSaver is working out for you.”
Johnson’s career has spanned Australia, London, and now New Zealand, giving him experience with retirement saving schemes in three countries. He says KiwiSaver is his favourite when it comes to simplicity.
“Kiwisaver is a really simple mechanism for saving for retirement,” he says.
Over $100 billion
Research firm Morningstar reported that KiwiSaver funds under management reached $108.6 billion in March, up from $104 billion in December.
The FMA’s 2024 annual KiwiSaver report won’t be out until later in the year but when asked to sum up the twelve months to March 31, 2024 in the KiwiSaver space, Johnson described it as a positive period.
“We talk about having the cost of living crisis right now, but people are, by and large, still contributing. So that's a real positive,” he says.
The FMA’s 2023 annual report showed there had been a significant rise in financial hardship withdrawals and savings suspensions in the 12 months to March 31 2023, compared with the previous year.
Inland Revenue releases monthly KiwiSaver statistics, most notably on financial hardship and first home withdrawals. KiwiSaver withdrawal figures released for the month of May 2024 reached an all-time high of $182.5 million.
Receiving the KiwiSaver government contribution
The end of this week also marks the cutoff for KiwiSaver members to make sure they can receive the full amount of the Government’s KiwiSaver contributions.
Each year, the Government contributes up to $521.43 towards your retirement savings. Members of KiwiSaver don’t need to do anything to claim this contribution as KiwiSaver providers will do this for them.
The maximum amount the government contributes is $521.43 and to receive the full amount, KiwiSaver members need to save and contribute at least $1042.86 of their own money between July 1st to June 30th each year.
People have the option to make additional voluntary contributions in order to reach the $1,042.86 benchmark, however contributions need to have been made by June 30th.
More information can be found on Inland Revenue here.
14 Comments
Moving to a low fee passive fund is great but the main problem with Kiwisaver is the lack of tax advantage. Now when you sign a job offer you can just ask for 3% higher non-KS total-comp package and then it's only worth putting $20/wk into KS to get the $10/wk tax credits which haven't been scaled for inflation in over a decade.
If NZ wants to be serious then KS needs to have lower taxes for KS or taxes deferred until withdrawal.
Well its a bit like the tax on your bank savings isn't it ? If you want to encourage people to save for their retirement how about stopping taxing them to death at every opportunity ? Any savings you have in the bank should not be taxed at all, just like it was some 40 years ago now. People wonder why they are going backwards these days, its because you are basically being robbed.
Bank savings are not taxed, the interest earned is, which i assume you meant. Kiwisaver and any other investment fund earnings are taxed in the same way, but here's the BIG difference, capital gain is NOT taxed so Kiwisaver is WAY more tax efficient than a savings account. All the proponents of a CGT should be careful what they wish for, me, I wish for a land tax and a bulldozer through the spagetti junction of our tax system.
If you are old enough to remember, the interest earned on your money in the bank was not taxed. What happened next was you filled out a tax return for a few years and was able to claim it back and eventually they just stopped you getting any back at all. Its just robbery by stealth, this is why people are plain stupid when they want even MORE tax of any type, its usually a one way trip, thankfully they dumped the inheritance tax or trying to tax you when you passed on any money to your kids over $25K probably 10 years ago or more now.
Not old enough sorry.
What is stupid is our love affair with taxing income and not voting in the only party with a semblance of reform..ie TOP re tax free threshold and tax switch.
I wonder how much better off we would be with tax free threshold, UBI, land tax and GST at 20+% with commensurate lowering of income tax?
Easiest way to avoid tax on savings is to get it out of the bank and in to a low fee fund, eg simplicity or investnow foundations and others under 0.5% as already mentioned.
"If you want to encourage people to save for their retirement ..."
Well, do we?
Fact is, it won't make a rat's ass worth of difference to the Government, or to me as taxpayer, whether you save for your retirement or not. You'll cost us the same, ie you get your NZS at the same rate, whether you have $10k or $10m in retirement savings.
The only person who will be better or worse off in future, depending on whether or not you make intelligent decisions about saving for retirement now, is YOU. The benefits of you saving for your retirement accrue to YOU and are entirely private. Where is the public interest in paying to increase that benefit?
"If you want to encourage people to save for their retirement ..."
Well, do we?
Fact is, it won't make a rat's ass worth of difference to the Government, or to me as taxpayer, whether you save for your retirement or not. You'll cost us the same, ie you get your NZS at the same rate, whether you have $10k or $10m in retirement savings.
The only person who will be better or worse off in future, depending on whether or not you make intelligent decisions about saving for retirement now, is YOU. The benefits of you saving for your retirement accrue to YOU and are entirely private. Where is the public interest in paying to increase that benefit?
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