KEY POINTS:
Last Saturday you talked about asking a KiwiSaver provider to switch any new contributions to a low-risk fund - rather than moving money already in KiwiSaver. "That way you won't sell any shares at the current low prices."
I am a member of Tower's Balanced Fund, chosen oh-so-long-ago in secure monetary times - June 2007! However, I am 61, and with my other superannuation fund faring very badly, plus other investments either being lost (finance company) or greatly going down in value, I'm not so confident that I have long enough to recover from all these losses.
So I liked your idea of putting new contributions in some lower-risk fund, but am wondering whether you would expect providers to do this. I know they will let you change your total investment to another fund.
Perhaps because the market is so competitive, KiwiSaver providers tend to be pretty flexible. A survey of some of the big providers, including Tower, finds that they will let you:
* Switch your future contributions to a new fund, but leave earlier contributions where they are if you wish.
* Move some or all of the money already in your account to a different fund.
One exception is AMP, which goes along with this unless you are in the AMP default fund. If you want to move out of that fund, you must move all the money in that account and also pay future contributions to the fund you move to.
You can get more info and forms from your provider's website or by ringing them.
If other readers find their provider is not that flexible - or has only the one fund - they can always move provider. All you have to do is contact your new provider, who will arrange the move for you.
Most providers don't have a set-up in which you could, for example, arrange to move quarter of your money now, a quarter in six months, a quarter in 12 months and a quarter in 18 months. You would have to take the initiative to make the move each time.
But that shouldn't be difficult and, if you do want to move out of a riskier fund, it's worth it to spread your exit over a year or two, so that you don't find you have moved the whole lot right at the bottom of the market - whenever that turns out to be.
In most cases, providers don't charge a fee if you switch funds, although some limit this to one or two free switches a year.
I would hate all this to leave the impression that I'm recommending moving out of a KiwiSaver fund or any other investments with considerable share holdings and perhaps also property holdings.
Their value will almost certainly have fallen lately, but that's actually a good reason to invest in such funds, rather than the reverse. You'll be buying at what may turn out to be pretty cheap prices in the long run, although nobody can be sure.
Strengthening the "buy now" argument is the issue of rebalancing. If you decided some time ago that your investments should be, say, half shares and half bonds, the recent plunges in share prices will have tipped the balance in favour of bonds. So you may want to make future investments largely or fully in shares for a while, to get back to roughly 50:50.
In our correspondent's case, though, it sounds as if it's time for a change of direction towards more conservative funds. Such a change makes sense if you are getting within, say, 10 years of spending the money or if you really can't cope with volatility.
If you are in the latter group, though, promise yourself you won't move back into riskier investments when the markets improve. Moving back and forth is a loser's game as most people, even the experts, often get the timing wrong.
Is there a date by when the IRD have to credit the previous year's KiwiSaver tax credit?
Looking at my account, which was started on the second day of the KiwiSaver introduction, only the initial $1000 starter has been credited to the account. It is now six months since the end of the financial year 2007-2008 and the tax credit has still to hit the account.
In theory, this affects the earnings of the account as the $1043, which at the very least would be gaining interest, is missing. You could say this is a piffling amount, but there is a principle at stake.
The IRD are pretty quick to apply penalty tax for late payment. It should work the other way.
Your argument would be stronger if you had overpaid tax. But given that the KiwiSaver tax credit is a government gift to you, you might be accused of looking a gift horse in the mouth.
Nonetheless, the tax credit was part of the deal when you joined KiwiSaver, and a six-month delay does seem too long - if, in fact, it were a six-month delay. It's actually only three months.
The KiwiSaver tax credit year doesn't end on March 31, as you have assumed, but on June 30.
Any time after that date, each provider sends to Inland Revenue a list of how much each of its members contributed during the year ending June 30, and the date that provider received each member's first contribution. The starting date is relevant, as the maximum first year tax credit is proportionate to how much of the July-June year each person was in KiwiSaver.
In some cases, Inland Revenue may receive more than one claim for the same person, if that person made additional contributions for the year to June 30 after the provider had sent in the original claim - presumably contributions that were delayed somewhere along the line. Also, some members may have changed providers.
Within 30 working days of receiving the information from scheme providers, Inland Revenue forwards the tax credits to the provider, to be allocated to member accounts.
As of September 30, Inland Revenue had transferred $259.3 million of this money.
It doesn't have data on the average amount per person. But let's guess that the average KiwiSaver received a $522 tax credit - half the maximum because on average they joined halfway through the year.
If that's anywhere near accurate, it means about half a million people - of more than 800,000 in the scheme - have so far received their tax credit.
What about the rest? The slowness is not necessarily Inland Revenue's fault.
"Providers have had to implement new technology systems and test them before lodging claims, so the information has been arriving at Inland Revenue gradually since July," an Inland Revenue spokesperson says. "Claims from two large providers are still outstanding." This, of course, delays the crediting of member accounts.
However, the spokesperson expects the system to be much more streamlined next year.
"Members who wish to know whether or not their tax credit claims have been processed can call their scheme provider, or register for MyKiwiSaver at www.kiwisaver.govt.nz," she adds.
Readers on KiwiSaver
The following are some of the winning entries in the Herald's Money Column giveaway of my new book, KiwiSaver Max: How to get the best out of it. To enter, readers had to say in 50 or fewer words what they think of KiwiSaver - good, bad or both.
Here's a few quick words on what I think of it: KiwiSaver: Money for jam. Pass the bread.
Tony Kelly, Papakura, Auckland
I'm 65 and joined KiwiSaver when it started. The kick-start was great, but having the government match my contributions is even better. I had private superannuation a few years ago, and saw my funds diminish rather than grow. That's not likely to happen with KiwiSaver.
Chris Bullen, Whakatane.
KiwiSaver is so cool
If you don't join you are a fool
Contribute a third and receive two
This calculation appears too good to be true
Once paid for one year
Take a holiday, disappear
What can KiwiSaver offer you?
Sign up, make retirement dreams come true
Karen Jones, Whangarei
I applaud the concept of KiwiSaver, as our savings ability is poor. I've not subscribed because a minimum 2 per cent contribution is substantial combined with student loan payments and tax on my wage. If there was a small start package ($15) I believe there would be more sign ups.
Tracy Warrington, Army Bay, Auckland
Comment: If your employer has given you the 2 per cent option (with the employer also paying 2 per cent until April 2010) you are luckier than most employees who may be struggling to put in 4 per cent of their pay. And remember, you have to contribute for only one year. C'mon, you can do it! Still, I agree that it would be good to give employees the option of starting with really low contributions.
Eliminated eliminated eliminated! Very disappointed at not being eligible to enter your competition to win a copy of your book "KiwiSaver Max", for the sole reason I don't have email or the internet. I have enjoyed your column and found my provider referring to your little red book often. Could any subsequent competition please include postal addresses as well?
Heather Rayner, Belmont, Auckland.
Comment: How could I not include you? We figured that most readers have some sort of access to email these days, even if it's via a friend or the local library. But you've proven us wrong.
KiwiSaver is great! Only a dummy would ignore the kickstart bonus and tax savings. It promotes thought on planning for one's future, and teaches a lot of people that you do not have to spend every dollar you earn, putting a little away for the future is not painful.
Ron Davis, Albany
NATIONAL'S KIWISAVER PLANS
The National Party's proposals to change KiwiSaver, if it wins the election, would considerably reduce two of the biggest gripes about the scheme - that some people can't afford it and that it ties up savings.
There are, however, some negative aspects too. And for employers it's a mixed bag, with more bad than good in the short term.
To learn more, see the articles I wrote in the Herald last Thursday, on www.herald.co.nz, or on the Freelance Articles page on www.maryholm.com.
Mary Holm is a seminar presenter and author. Her website is www.maryholm.com. Her advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@maryholm.com or Money Column, Business Herald, PO Box 32, Auckland. Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Sorry, but Mary cannot answer all questions, correspond directly with readers, or give financial advice.
