Herald articles have highlighted difficulties with payments to the scheme. Inland Revenue's Alan Pinder explains.
KEY POINTS:
We can understand that KiwiSaver investors want to see the money they save turn up in their accounts. A bit like a bank account, once you make a deposit, you look forward to seeing this appear on your balance.
However, the process for collecting KiwiSaver contributions is a little more complicated than a simple bank deposit.
At the same time, we are extremely conscious that this is your money. You want to see it with your provider as soon as possible, and we apologise to anyone who has experienced delays in having their KiwiSaver payments processed. We can assure you that the figures will square up - and in the meantime you are earning interest while your money is with Inland Revenue
I would like to explain how KiwiSaver payments are processed and why there can appear to be a difference between amounts paid by employers and the amounts appearing on statements from scheme providers.
As an investor, you can be confident that while your money is with Inland Revenue, it is in safe hands. KiwiSaver employee deductions are government guaranteed, and your money earns interest while it is with us.
Every payday, your employer takes employee deductions from your pay and makes employer contributions to your KiwiSaver scheme. The money doesn't go directly to scheme providers. Instead, it comes to Inland Revenue along with other deductions that employers make - such as PAYE, child support, and student loan repayments.
Employers are required to send us the deductions, along with an employer report, in most cases by the 20th of the following month. So it can be some time before the deductions from your pay packet reach us.
For example, an employee deduction made in early June may not get to us till the 20th of July.
When we receive the employer's report, we need to check it to make sure the money is credited to the right people. Sometimes information is missing, or the data doesn't match our records. In these cases, we need to follow up with the employer.
Checking an employer report can take up to a month, although it can be less if everything goes smoothly. However, sometimes it can take longer. Once we know the employer report is in order, we transfer the KiwiSaver payments to the scheme providers.
That means that deductions made in early June may not reach your scheme provider until late August.
The Government guarantees that your employee deductions will be paid to your scheme provider. That means your account will be credited, even if your employer is late paying us the money.
Employer contributions, on the other hand, are not guaranteed by the Government. We can only send your employer contributions to your scheme provider if your employer has paid the money to us.
However, the good news is that Inland Revenue does credit interest of 5.36 per cent, after tax, to your KiwiSaver account. Interest on employee contributions is earned from the 15th of the month your contribution comes out of your pay packet. Interest on employer contributions is paid at the same rate, from the first day of the month the employer contribution arrives with us.
Because employers only file one employer report each month, it can be hard to reconcile your payslip with the statement you get from your scheme provider. But rest assured the amounts balance in the long run.
As at 1 October, 93 per cent of employer contributions and 95 per cent of employee contributions for the period April 1, 2008 to July 31, 2008 had been processed. The rest will be processed shortly
A total of $1.7 billion has been passed over to scheme providers since KiwiSaver started on July 1, 2007. That includes $613 million in employee contributions, and $124 million in employer contributions.
We apologise to anyone who has experienced undue delays with their KiwiSaver payments. It is something we're taking very seriously. If you have any concerns, please ring us toll-free 0800 KIWISAVER (0800 549 472).
* Alan Pinder is Inland Revenue's acting deputy commissioner of business development & systems.
