KiwiSaver

A Bill that will allow KiwiSaver members to withdraw their Government tax credits as well as their and their employers’ contributions has had its first reading in parliament.

The Taxation (KiwiSaver HomeStart and Remedial Matters) Bill also doubles the subsidy available for first-home buyers if they are purchasing a new home, from $5000 to $10,000.

It increases the house price caps to $550,000, $450,000 and $350,000 for Welcome Home Loans and the KiwiSaver HomeStart Grant subsidy.

Building and Housing Minister Nick Smith said it would enable tens of thousands more young New Zealanders to get a deposit together for a first home.

Revenue Minister Todd McClay said the biggest change was the move to allow savers to withdraw the Government’s member tax credit as well as their contributions.

“This change will increase the maximum withdrawal amount by $521 each year for every year a member has been contributing to KiwiSaver and allows members to withdraw all of their KiwiSaver savings with the exception of the $1000 kickstart,” he said.

Smith said: “This total package will help about 90,000 lower and middle-income first-home buyers over the next five years. We are roughly doubling the number of people receiving a Government grant to buy a first home from 10,000 per year to 20,000 per year. We are also doubling the Government grant buyers are eligible for if they are buying a newly-built home, with the focus of the package to increase the supply of new housing and to encourage housing companies to build homes in a price range affordable for first-home buyers. These changes double the Government’s support for first-home buyers from $217 million to $435 million over the next five years.”

KiwiSaver members who are engaged with their retirement savings are better placed to take action throughout their lives to reach their goals, ANZ’s general manager of wealth products and marketing, Ana-Marie Lockyer, says.

The bank released a survey yesterday showing that half of KiwiSaver members had not checked that their savings were on track to meet their retirement goals.

ANZ launched a new online calculator, which takes some personal information and works out the projected amount someone would have when they retire, the amount they will need and whether they are headed for a gap in their savings. The online tool then proposes and calculates the effect of steps people can take to close that gap, such as making a lump sum contribution, upping their regular contributions or moving their money to a different type of KiwiSaver fund.

The ANZ survey of KiwiSaver members last month found that 63% of members had checked their KiwiSaver balance in the past month, and a further 26% had checked their balance in the last year.

However, 46% of members had never checked to see whether their KiwiSaver was on track to meet their retirement goals, with a further 3% checking five years ago. Despite this, 71% of members believed they should check every year to ensure their KiwiSaver investment was on track.
“Research tells us that people who know their KiwiSaver balance are more confident of reaching their retirement savings goals than those people who do not know how much they have saved,” head of wealth John Body said. “It’s great to see more KiwiSaver members are checking their balances regularly. In recent times, we have put a lot of energy into making it easier for people to track their KiwiSaver which they can now do through their ANZ internet banking or our go Money app.”

Body said that people should check they are on track once a year and whenever there was a change in their financial circumstances – for example, starting a new job or buying a house: “It’s all part of taking control of your life and your investments.”

Lockyer acknowledged there was a school of thought that people should not check their balances regularly because KiwiSaver is a long-term strategy. She said while people should not be chopping and changing their strategy regularly, it was worth checking in from time to time.

International research had shown that when people could see their contributions being made regularly, they felt good about their savings, she said. “We do want people to engage with their retirement savings and taken the right action at various points in life.”

If people were taking action too regularly on their accounts, the bank would encourage them to get advice, she said.

KiwiSaver members are being told to consider the impact of tax on their investments.

Morningstar has released its latest KiwiSaver survey, covering the period to September 30.

KiwiSaver schemes with international exposure performed best over the September quarter. Those that made an active decision to allocate capital to growth assets also benefited as equities outperformed bonds.

The falling NZ dollar helped funds that left international investments unhedged.

There were no standout performers across the categories, but Milford KiwiSaver came out on top of the balanced and moderate categories and ASB was solid across the board.

OneAnswer KiwiSaver was very strong in the international equities category.

Over a longer term, Aon KiwiSaver Russell was at or near the top of all five categories. 

ANZ KiwiSaver continued to be the strongest of the default providers across the board.

Morningstar said investors should not forget about the impact tax could have on their investments.

“Not all investments are subject to tax and some parts of the market are significantly more tax-efficient than others. For example, capital gains tax is not charged on New Zealand and Australian shares, whereas international shares are treated differently and typically will pay more tax. Other factors that can affect the tax paid include fees and the impact of foreign exchange.”

Morningstar included a survey of funds’ tax-cost ratio, representing how much a fund’s annualised return was reduced by the taxes members paid.

Of the balanced funds, AMP KiwiSaver LS Balanced at the highest tax-cost ratio, of 1.68%.

The least taxed was Westpac’s balanced fund.

Morningstar said tax would have a direct impact on the growth of KiwiSavers’ retirement nest eggs.

“However, investors should not select investments solely on the basis of the level of taxation, as that can lead to poor investment decisions.”

Online KiwiSaver advice offerings will never replace personalised advice, says the founder of one that went live this week.

SavvyKiwi launched on Monday.

It offers a free tool that allows people to see how their KiwiSaver funds are performing against others that are similar.

It also offers premium memberships, for $89 for one year, $159 for 24 months and $209 for 36 months, to match a saver to the right fund, provide expert views on the fund, ongoing information and educational videos.

Founder Binu Paul said most people were signing up for 12-month subscriptions at present but he hoped they would eventually become long-term clients. “Ultimately, that’s what we’re trying to provide.”

SavvyKiwi holds regular one-on-one meetings with fund providers and would send emails to members about any developments.

Paul said: “We have interaction with the fund to find out what’s going on and it’s up to us to decide what’s relevant.  If a manager moves on, we go in and find out what that means. If it’s not a big deal, we let you know. In the alternative scenario, if it’s a pretty big move, we’ll give you some alternatives to consider.”

Meetings would be held with the people managing the money every three months.

Paul said the offer would probably not appeal to the vast majority of KiwiSavers at the moment. But there was a group who wanted more information about their KiwiSaver investments.

“Most people don’t understand the value-add but there are people who do value and understand it and that group is growing. Over the next few years, people may be surprised at their KiwiSaver balances and sit up and take notice.”

Clients who had a face-to-face meeting with a financial adviser would get more value than from an online service, he said. “They can talk about the mortgage, whether you’re saving for kids’ education, whether you need a holiday, what insurances you have and what you want your retirement lifestyle to be like. We’re probably in a slightly different space, we don’t get into personalised advice.”

But clients who met an adviser face-to-face would need to pay much more, he said.

SavvyKiwi would narrow down the choices of funds to three for each person. Out of those three, it was up to the individual to decide which was best.

Videos would give them extra information, such as about what a passive or active approach would mean. “We don’t want people making a choice without knowing what it means,” Paul said.