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KiwiSaver at work: 7 ways to set your KiwiSaver up for a win

26 January 2016

Negotiating an employment contract is a great time to optimise your KiwiSaver.

Negotiating an employment contract? Here's some KiwiSaver advice to get you started.

Starting a new job or negotiating an existing contract is a great time to optimise your KiwiSaver plan and set yourself up for the retirement of your dreams.

Here are 7 ways to set your KiwiSaver up for a win:

  1. Be in to win. First up, if you’re not in KiwiSaver by now then you really should consider jumping on board. Recent figures highlight how the pension barely covers even basic expenses, and to survive in retirement we all need to take matters into our own hands. You’ll be surprised how quickly KiwiSaver adds up – especially when your employer matches your contributions dollar for dollar (up to 3%), and the government gives member tax credits of $521.43 every year (if you’re contributing at least $20.06/week). Seriously consider getting on board now as these benefits are unmatched elsewhere!
  2. Make sure your employer is playing by the rules. Employer contributions to KiwiSaver (of 3%) are compulsory. Most employers these days are on the level, but that doesn’t stop some cowboys from trying to pull the wool over some people’s eyes, or pressuring employees not to join. When negotiating any employment contract, be confident of your right to receive the benefits of KiwiSaver.
  3. Be aware of your negotiated salary – does it include KiwiSaver or not? Employers are allowed to make offers of employment that either include their KiwiSaver contribution into the total salary package, or that are made up of a base salary or wage plus KiwiSaver (and other benefits). Having said that, it’s illegal for those on the minimum wage to have KiwiSaver included in their total salary package (employers have to pay this over and above to ensure the worker is not receiving less than the minimum wage before their employer contributions are taken into account). Make sure you and your employer are both on the same page in terms of what is being agreed on, and that it’s included in your employment contract.
  4. Want a pay rise but the boss isn’t budging? Consider suggesting an increase to their KiwiSaver employer contribution as an alternative to a direct pay rise. OK, so not all employers will go for this, but it can be another way of getting a result, and put more in your pocket for the long term. Crafty!
  5. Beware of default schemes. If you’re joining KiwiSaver for the first time, you might find yourself on a default KiwiSaver scheme. That’s ok, but be aware that default schemes start you on the highest tax rate, which many people fail to correct once they’ve joined. We recommend talking to an adviser first, that way:
    • You’ll be enrolled and all set up before your first contributions start
    • Your adviser will ensure you are on the right tax rate from the get-go
    • You’ll be able to get advice to ensure you’re in the right type of fund based on your appetite for risk, and we’ll check in with you once a year to review your situation and get the most out of it for you If you are already in a default scheme and would like to change, it’s easy to switch and we are able to advise and assist you on the process.
  6. Advice doesn’t have to cost you. At Cole Murray our KiwiSaver advice comes at no additional cost to you (we are remunerated by the KiwiSaver provider directly). Every day we are helping people get the most out of their KiwiSaver, and we enjoy doing it.
  7. Changing jobs and already enrolled in KiwiSaver? If you’re changing jobs, you don’t need to do anything to remain in KiwiSaver. When you start your new job your employer will give you a quick form to fill in, which just confirms that you’re in KiwiSaver, and how much you’d like to contribute from your salary. Because all your details are already lodged with the IRD and your provider, your contributions will go straight to your existing KiwiSaver provider as normal.

If you are changing jobs or renegotiating, we wish you the best of luck. Also do remember that if you’ve had a change in salary, or are now the main breadwinner, you may also want to arrange a review of your insurances to protect your biggest asset - read our article about, "5 reasons you may need to adjust your life insurance cover and seek insurance advice."

Talk to us today to discuss your options - email our KiwiSaver advisers or phone 06 870 7050.

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