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KiwiSaver beyond 65

Q. What changes happen with your KiwiSaver when you reach 65? If you continue with contributions is there still an annual Government credit? I'll be 65 in March next year and intend not to be in paid employment.

A. Turning 65 is a big milestone for most KiwiSaver members.  As long as you have been a member for at least 5 years, at this date you will reach what is described in the KiwiSaver Act as the ‘KiwiSaver end payment date’.  This is also the date ‘on which the member reaches the New Zealand superannuation qualification age.’  Currently this is age 65, so you should be able to access your savings at that time.

It does not mean that your KiwiSaver account will be closed, and the money paid out to you automatically.  Far from it.  The ‘do nothing’ option is that your KiwiSaver account continues, and your employer (for those members who are still working) must continue passing on your KiwiSaver employee contributions if you wish her or him to do so.  Your employer is not obliged to continue making their 3% employer contributions (although some do) and the annual Government member tax credits or MTC also stop.  As these are paid out in July each year, and you don’t turn 65 until March, you will get around 8 months’ worth of MTC credited to your account in July. 

Your fund manager may write to you a few months before you turn 65, outlining your options.  They would prefer that you continue with your account, and indeed if you have no plans to spend all the money within the next year or two, it is a good idea to keep your account going.  It is a convenient way to diversify your investments over your retirement years.  Now that we are living longer, you could have another 20-30 years ahead of you. 

You should review your risk profile and make sure that you are taking on the correct amount of risk for your timeframe.  We use the term ‘risk’ for volatility, or the extent to which your investments will go up and down in value as the sharemarket fluctuates.  KiwiSaver schemes are well regulated, so we are not talking about the risk of your money being misappropriated or invested in some dodgy deal. 

If you keep your account open past the age of 65, you can switch between KiwiSaver schemes (and funds).  Use the FundFinder tool on the Sorted website to compare funds.  You can find out how your fund is performing relative to other similar funds, and where your money is invested.  All you need is the name of your Scheme and the particular fund that you are in.  Sometimes this is in quite small print on your KiwiSaver statement, so if in doubt phone your fund manager on their 0800 number.  You can also ask them about their investment strategies, and whether they offer advice or other services such as roadshows or investment updates to members.  It is your money so remember - there is no such thing as a dumb question.

The ‘KiwiSaver end payment date’ is delayed for those who joined KiwiSaver after the age of 60.  For them, KiwiSaver continues with employer contributions and MTC until they have been a member for 5 years.  Someone can join KiwiSaver one week before they turn 65, and get all the benefits for the next 5 years, including 3% employer contributions if they are still working.  Only once they have reached that 5 year milestone will they be able to access their funds, and MTC and employer contributions will cease.

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