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Offshore grandchild misses out on KiwiSaver
 
Q.           We opened KiwiSaver accounts for our first three grandchildren when they were born.   We would like to do the same for grandchild number four, who was born in New Zealand last year but now resides with his parents in Australia.   Can we open an account for him now whilst he is in Australia or when next back on holiday in NZ - or when the family returns to reside in NZ?
 
 
A.            By signing children up to KiwiSaver you are giving them a strong message that setting goals and planning their financial future is important. We can say all we like about the importance of saving but actions speak louder than words and those children whose parents or grandparents have signed them up to KiwiSaver are getting a headstart in life. 
 
Social Development Minister alluded to this recently when she announced a plan to sign up New Zealand children in care to KiwiSaver through the Ministry of Social Development. While on a US Eisenhower fellowship in the USA in 2010, she observed the success of savings accounts set up for children in care.  “New Zealand children in care generally don’t have family who can sign them up to Kiwisaver, but being enrolled will help them later in life and send a message that their future matters,” she said in a Government Announcement last month.
 
Children have time on their side when it comes to KiwiSaver. All new KiwiSaver members including children get the $1000 kickstart. Even if no further money is added, $1000 invested at 4% net per annum will be worth $2000 after 18 years. Once they turn 18 they will be eligible for Member Tax Credits so they should think about contributing $20 per week if they can afford it, to get their full entitlement. This will also help them qualify for the First Home Deposit Subsidy after 3 years. 
 
Applications to join KiwiSaver for children aged 0 – 15 must be signed by both parents (or all legal guardians). If the child is 16 or 17 then only one parent or legal guardian is required to sign. 
Unfortunately for your fourth grandchild, however, he is not eligible to join KiwiSaver while he is living in Australia. The KiwiSaver rules are quite clear on this, and stipulate that only people living in New Zealand, and entitled to live here indefinitely, can join the Scheme. The main exception to this rule are Government employees serving outside New Zealand.
 
Up until June this year there were probably many New Zealanders living abroad who found the time to sign up to KiwiSaver when on a visit home. But on 30 June 2013 the Anti Money Laundering and Countering Financing of Terrorism Act came into force, and it is now much more difficult. This legislation requires all fund managers and financial advisers to verify the identity and residential address of every investor, including every new KiwiSaver investor. 
 
Now parents or grandparents wishing to sign up children to KiwiSaver need to verify not only their child’s identity and address but their own as well. Providing all this documentation is quite a hurdle for busy families. The child’s birth certificate is the best form of ID for them, but providing proof of address is more difficult. You can’t sign a child up to KiwiSaver unless they have their own IRD number, so keep the letter from IRD as proof of address. An invoice from a childcare centre may also be acceptable.
 
The most accessible forms of ID for parents is usually their drivers licence (or passport) along with a bank statement - which will also verify their address. 
 
In your situation, you will have to wait until your number four grandchild and his parents return to live in New Zealand permanently before signing him up to KiwiSaver. 
 
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 intended to provide personalised advice. Send your KiwiSaver questions to shelley.hanna@peak.net.nz. You can read earlier columns at www.peak.net.nz