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Helping adult children through KiwiSaver  

Q. My daughter who is 32 years old started KiwiSaver some years ago and has saved around $5000.  Almost two years ago she moved to Europe and hasn’t continued with payments into her KiwiSaver account. She has no immediate plans to come back to NZ at the moment.   Could I start to pay into her account and build up some security for her retirement?  What would be the minimum amount per month? 

A. Yes, you can pay money into your daughter’s KiwiSaver account.  Anyone who would like to help their children (at any age) can set up a direct debit into their KiwiSaver account, or make occasional lump sum payments.   

Although your daughter has no immediate plans to come back to New Zealand at the moment, I am sure she will appreciate you helping her financially in this way.  Most fund managers will accept regular contributions from $20 per month.  You should be able to find a direct debit form on their website, or call them on their 0800 number.  You will need your daughter’s KiwiSaver member number.  Anti-Money Laundering laws require information around the movement of money, so the form may ask you to provide information on your relationship with the KiwiSaver member. 

You will be in control of these payments, so if you wish to stop them (or change the amount) you can do so by sending written instructions to the fund manager, and your bank. 

While your daughter is living overseas she will not be eligible for the annual Member Tax Credits of up to $521 per year as these are only paid to members who are living in New Zealand.  If MTC are paid out to her KiwiSaver account in error they may be clawed back at a later date. 

Your daughter can keep her KiwiSaver account going for as long as she wishes, even if she decides to settle permanently in Europe.  In that situation she could apply to close her account and have the money paid out, but she would lose any Member Tax Credits that she received while she was living here.  If a person reaches the age of 65 and is living abroad, as long as they have a bank account in New Zealand they can apply to have all their money paid out, without losing the Member Tax Credits. 

Many parents plan to leave money to their children in their will, but helping them at an earlier stage is a good way of showing love and support, if you can afford it.  Paying smaller regular amounts into a young person’s KiwiSaver is a good way to help them into their first home.  Often parents get a frantic call for help when their adult child finds a house just outside their budget, asking for a loan of say $10,000 - $20,000.  If parents help them earlier with smaller regular amounts it is easier on their cash flow, and they can feel comfortable saying no to the request for a large sum. 

Each family has its own dynamics and it depends on the size of the family, the income of the parents and their overall financial situation.  It would not make sense for parents with a lot of debt to be topping up their adult children’s KiwiSaver, but it is certainly possible for those who are willing and able.  Wider family members, such as aunts and uncles (perhaps with no children of their own) can also help if they choose to.  It is a good way to demonstrate to younger people the power of regular saving and encourage them to develop a savings habit themselves. 

Shelley Hanna is an Authorised Financial Adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to www.peak.net.nz.  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