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KiwiSaver contributions start with first job at 16
 
Q.         We enrolled our son into KiwiSaver when the scheme started in 2007. He is now 16 and in Year 12 at school. He has been offered weekend work at the ‘starting out’ wage of $11 per hour. Will his employer automatically deduct KiwiSaver contributions from his wages?
 
A.         Even though your son is under 18, because he has joined the Scheme directly through a provider his employer should deduct 3% from his wages in KiwiSaver contributions. 
 
He may object in principle to having his wages reduced to fund a long term savings scheme, but he will hardly miss his KiwiSaver contributions. They are certainly a drop in the bucket compared to PAYE. If he works for 8 hours and earns $88, $10.73 will be deducted for tax and just $2.64 for KiwiSaver. And while the tax money is gone forever, his KiwiSaver contributions stay in his name and may help him buy his first home in a few years’ time.
 
His employer should give him an employment contract to sign, and he should read it carefully to see if KiwiSaver is mentioned. As he is under 18 he will not be automatically opted into KiwiSaver. Your son can fill out a KS2 form and give it to his employer so that his employer will know that he is already a KiwiSaver member (the form may be in his new employee pack or it can be downloaded from the IRD website).  
 
Your son will not be entitled to Member Tax Credits until he turns 18. Likewise, employers are not obliged to make their 3% Employer Contribution to workers under 18 but some of them choose to do so. If they do it should be on top of the minimum wage.
 
Making contributions to his KiwiSaver will give your son the satisfaction of seeing his fund balance grow by more than just investment returns, which have been pretty modest for those with just the $1000 ‘kickstart’. 
 
This is a good opportunity for him to get to know more about his KiwiSaver scheme, where his money is invested, and his risk profile. He can start by completing a risk profile questionnaire, such as the one on the ‘sorted’ website. This will help him understand the concepts of risk and return. He should find out which fund he is in if he doesn’t already know, and whether it suits his risk profile. 
 
At the age of 16 he probably won’t have firm ideas of what he wants to do when he leaves school and indeed whether he will stay in New Zealand and buy a home here or head overseas. But whatever he decides to do, his investment timeframe right now is probably 5 years or more, so he should be in a balanced or a growth fund rather than a conservative fund. While his fund balance is low it is not going to make much difference, but it’s a good time to have the conversation and set the pattern for regular reviews of his fund in the future as his balance increases. 

Shelley Hanna is an Authorised Financial Adviser FSP12241.  Her disclosure statement is available on request and free of charge by calling 8703838.  The information contained in this article is of a general nature and is not intended to provide personalised advice.  If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.