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You can belong to both schemes

Q.        I am a part-time primary school teacher. I have been contributing to the Government Employees Super Scheme for the last 10 years or so.  Can I also join the KiwiSaver Scheme? I am 62. How would it work with employer contributions? If I do join, what are the benefits - do I also get the Government's $1000 kick-start payment? 

A.            I am guessing that the Government Scheme you refer to is either the Teachers Retirement Savings Scheme (TRSS) or the State Sector Retirement Savings Scheme (SSRSS). The former was specifically designed for New Zealand teachers and launched in September 2002, while the latter was launched in 2004.  With the introduction of KiwiSaver all earlier Government schemes such as these have closed to new members, but existing members like you are able to continue their contributions. 

The good news is, you can remain a member of the Government scheme, and also join KiwiSaver. Are there benefits? There certainly are. If you join KiwiSaver you will receive the $1000 ‘kickstart’ and be entitled to annual Member Tax Credits based on how much you contribute – neither of these benefits are offered with the older Government schemes. Employee contributions can be made to both schemes (if you choose), but employer contributions will only be paid to one scheme. 

If you decide that contributing to two schemes takes too much of your income, you can suspend your contributions to the Government scheme and focus on KiwiSaver to get those Member Tax Credits. To get full MTC of $521 per year you will need to contribute at least $87 per month (employer contributions don’t count). As you work part-time, this may be more than 3% of your salary?   If so, either raise your contribution rate to 4% or 8% or set up a direct debit with your fund manager for the difference.

The KiwiSaver year starts on 1 July so if you can join this week you should be eligible for full MTC at this time next year. Each week you delay joining you will get less in MTC. 
If you join KiwiSaver, the funds in your Government scheme account will remain separate and subject to their own rules. You can apply to transfer the funds in your Government scheme to your KiwiSaver account but you will need to weigh up all the pros and cons. The Government schemes are similar to KiwiSaver in some ways, but there are important differences particularly when it comes to withdrawals. If you transfer your Government scheme funds to a KiwiSaver account the rules on when you can access your savings will change. For example, members of the Government scheme can apply to access their savings from age 50 if they leave State sector employment permanently or in the ten years prior to reaching the age of entitlement to NZ Super if they are partially retiring. 

As you are 62, you will need to be a member of KiwiSaver for 5 years before you reach the ‘age of eligibility’ when your funds are unlocked. You can continue contributing to KiwiSaver and get MTC for this 5 year period. Once you reach the age of eligibility you will no longer qualify for MTC and the final amount will be calculated pro rata from the month of your 5 year anniversary.
 
Hawkes Bay Today 1 July 2014
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 870 3838. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz