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Joining KiwiSaver outside the job
 
Q.        My employer is not really a KiwiSaver advocate and he salarises all benefits so my take-home pay is more because I am not in KiwiSaver. The tax credits available from the government look attractive so could I start a KiwiSaver account without getting a contribution from my employer? I have heard of the term contribution holiday in respect of KiwiSaver. Could I utilise this so the IRD does not pressure my employer? I enjoy my job and I do not want to upset my employer.
 
A.         Unless workers are on the minimum wage, employers can negotiate to deduct both employer and employee KiwiSaver contributions from the worker’s wage under a ‘total remuneration’ agreement. It sounds like may be the situation for you?   While it sounds unfair, Section 101B(4) of the KiwiSaver Act allows for this. Employer contributions can be bundled into employees’ pay, if the parties have entered into the agreement after 13 December 2007 and where the agreement accounts for the employer contributions in the employee’s pay.  Anyone starting a new job should read their employment agreement carefully to see if KiwiSaver is mentioned in this way.
 
If this is indeed the situation for you, your joining KiwiSaver will not cost your employer anything and is therefore not likely to upset him or her. Your employer’s opinion of you is not likely to be affected by your joining KiwiSaver, if you are a valued employee. 
 
If you would like to join KiwiSaver without telling your employer you can join directly through one of the 24 fund managers running a Scheme, and set up a direct debit for say $40 per fortnight which should be enough (you need to put in $1042.86) to qualify for full Member Tax Credits ($521.43) at the end of each KiwiSaver year. 
 
Inland Revenue may in due course contact your employer to tell them to start deducting contributions from your pay. From what I have heard, they are not very good at following up enrolments in this way and for most people who join KiwiSaver directly with a provider I recommend that they also notify their employer themselves by giving them a completed KS2 form. In your case, it may be some time that IRD joins the dots and advises your employer that you are indeed a KiwiSaver member. If and when that happens, you can cancel your direct debit contributions at any time. 
 
I do not think a contributions holiday will serve your purpose in any way, as in normal circumstances you need to be in KiwiSaver for 12 months before applying for one. 
 
 
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06-8703838 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
As published in the HB Today 21 July 2015