KiwiSaver is an easy and affordable way to save for your retirement. And although nearly two million New Zealanders are enrolled in KiwiSaver, many are not entirely convinced of its benefits. The main reason for this is that there’s a lot of misinformation and mistrust when it comes to government saving schemes. We think it’s about time that we try and set the record straight and dispel some of the commonly held myths.
Myth: The scheme is not safe because it’s not government guaranteed
Truth: KiwiSaver is no different from any other investment in this respect. It’s intended to be a long term savings scheme and if investors do suffer losses in the short term, these losses will almost certainly be recovered in the long term.
Myth: A successive government will scrap the scheme and run off with all our money
Truth: The government doesn’t have the power to take your money! As KiwiSaver is like many other savings or investment schemes, you retain the ownership to your own investment fund. The government’s only role in KiwiSaver is to administer salary deductions and remit them to the employee’s chosen KiwiSaver scheme provider.
Myth: You’re better off investing your money elsewhere
Truth: If you are an employee earning $40,000 per year and opt to contribute 3% of your salary, then your annual contribution will be $1,200. Once all the automatic IRD incentives are added, your account balance would be $3,920 (excluding charges and investment performance). Provided that you don’t need access to your funds prior to reaching the age of 65, it’s unlikely you’ll get a better return for your investment elsewhere.
Myth: If I die before I turn 65, I will lose my KiwiSaver money
Truth: In the event of your death, the full value of your fund will be returned immediately to your next of kin, so you can’t ever lose the money.
Myth: It doesn’t work for me as I’m not an employee
Truth: You can still enrol and receive the $1,000 kickstart. In addition, if you choose to contribute up to $20 per week to KiwiSaver, the IRD will automatically add Member Tax Credits of 50 cents for every dollar you contribute. This equates to a 50% investment return (excluding charges and investment performance). Where else can you get that kind of return?!
We regularly meet with clients who are unsure about what KiwiSaver really means for them. If you have any of these concerns or want to see if you are invested in the most appropriate fund, come and talk to us.
A free disclosure statement is available on request.
Foresight Financial Planning received HighlyCommended in the New Business Excellence category in the Taranaki Business Awards 2013.