3 August 2007

Methodist Church of New Zealand - Board of Administration

KiwiSaver

Statement for Employees

The announcement of Kiwi Saver in 2006 and the enhancements released in the 2007 Budget have highlighted the benefits of personal savings for retirement.

The Methodist Church of New Zealand supports the principles behind the introduction of personal pension plans such as those available through the Kiwi Saver scheme and encourages all employees to make provision for their retirement from the earliest opportunity available to them.  The following is a brief summary of the Kiwi Saver scheme as at July 2007.

What is it?

• It is a work based savings scheme.
• It is not compulsory for any workers.
• Employees who start a new job from 1 July 2007 will be automatically enrolled and they will need to actively opt out of KiwiSaver between weeks 2 and 8 after starting the new job.
• Existing employees are able to opt into KiwiSaver if they choose to do so.
• Savings are locked until the age of eligibility to National Superannuation (currently 65).
• Employee contributions are either 4.00% or 8.00% of an employees gross earnings.
• Withdrawals are only allowed under certain circumstances such as death, financial hardship, serious illness, emigration from New Zealand.
• The government will put $1,000 into each new KiwiSaver account.
• The government will pay $40.00 per annum to help pay for the annual fund management fees.
• Employees need to choose a fund manager or the IRD will select one of the default fund managers for the employee.

When will it Start?

KiwiSaver is set to start from 1 July 2007 with additional changes coming into force from 1 April 2008.

Employees who start a new job after 1 July 2007 will be required to be automatically enrolled and will stay enrolled unless they opt out between weeks 2 and 8 of their new employment.

Employees in existing jobs on the 1 July 2007 may opt in if they choose but will not be automatically enrolled.

The major announcement in the budget which will affect KiwiSaver from 1 April 2008 is that employers will be required to provide a contribution to an employees KiwiSaver account as follows:

(% of gross salary ‘a’) Employee contribution

(% of gross salary ‘b’) employer contribution

(% of gross salary ‘c’) Total employee and employer contributions

How do you Join?

If you wish to join KiwiSaver, you need to complete a KS2 form which is a KiwiSaver deduction form and hand this to your employer who will start making deductions from your pay.

You will also need to make contact with the scheme provider of your choice to fill in an application form that the scheme provider can pass this information onto the Inland Revenue Department and match that with your KiwiSaver deductions.

Why should I Join?

It is your choice, but here are some of the benefits:

*          $1000 deposit into your KiwiSaver account by the Government.

*          $40.00 per year contribution towards KiwiSaver membership fees.

*          A Government tax credit of up to $1,040 per year into your KiwiSaver account.

*          An employer contribution of 1% starting 1 April 2008 and up to 4% from 1 April 2011 into your KiwiSaver account.

Providers

Employees are able to select a Kiwi Saver provider from a wide range of institutions or if they do not make a selection and do not withdraw from the Scheme within the two to eight week withdrawal period, the Inland Revenue will appoint a “default provider” to invest their savings account for them.

Details of scheme providers are widely available and there is a list of current providers on the IRD website www.kiwisaver.govt.nz.

The selection of the scheme provider is important to you as different providers may offer one or more investment funds which will have differing risks and returns and the Fund that is correct for any individual will depend upon a number of factors including age, family circumstances, financial circumstances etc.  It must be noted that Kiwisaver accounts and income returns from year to year are not guaranteed by the Provider, the employer or the Government.

Accordingly, whilst the Methodist Church of New Zealand encourages all employees to save for retirement including the use of the provisions of the Kiwi Saver scheme, it is not considered appropriate for the Methodist Church of New Zealand to suggest or recommend any one provider or any specific fund.  It is suggested that employees should carefully review a range of providers and funds noting such things as fund managers’ experience, past record, their expectation of returns for the risks inherent in the investment programmes, the ability to move between different investment funds as the individual’s circumstances change and the level of fees offered.

The selection of a Kiwi Saver scheme provider is likely to signal the start of a long relationship and all employees are encouraged to think carefully about the decisions to be made.

Back to Administration Division Index