KEY POINTS:
Leaving the country may be the only way for most people to get their money out of KiwiSaver if they want it before turning 65.
A series of questions sent in by Herald readers about emigration have established that anyone leaving the country permanently can withdraw all their accumulated funds in KiwiSaver, one year after they leave, except for the Government's subsidy of up to $20 a week. That will be clawed back.
Everything else - including the Government's initial $1000 "kick-start" and the investment returns from the $20-a-week subsidy - can be withdrawn.
The legal rule will be that New Zealand has ceased to be a person's "principal place of residence". "If New Zealand ceases to be your principal place of residence, then you will no longer be entitled to the member tax credit [$20 a week]," the Treasury says.
But there appears to be nothing to stop you, once you have got your money out, changing your mind and coming home again.
A spokeswoman for Inland Revenue said the same principle applied when someone filed a final tax return to claim a refund when they left the country. The only other ways to get your money out before you turn 65 are "serious illness", "significant financial hardship" or making a deposit on your first home.
If I follow my kids overseas in my retirement, can I take KiwiSaver with me? Is it taxable overseas in say Britain or France?
Inland Revenue replies: "Yes, of course you can, because you would have withdrawn your money already as you are retired. No tax would apply in another country until you do something with your lump sum such as buy goods or invest your savings."
Will there be any KiwiSaver funds that also meet the requirements of the Australian compulsory superannuation scheme? Hence if I move to Australia to work for a short period, can I get my compulsory superannuation credited to my KiwiSaver fund instead of allocating it to an Australian super fund?
In general, no. There are no reciprocal arrangements yet, so if you are earning money in Australia your employer will have to pay money into an account for you, which is generally locked in until you retire. Like all Australian employees, you don't have to pay anything towards the Australian compulsory scheme yourself.
While you are in Australia short-term, you can either take a "holiday" from KiwiSaver contributions or keep contributing to your account back home out of your Australian earnings. If you keep contributing at least $20 a week, the NZ Government will keep paying the $20-a-week subsidy into your account.
In a case of a Kiwi retiring overseas, would your legal entitlement of benefits in that country be directly reduced by the amount of your KiwiSaver annuity or lump sum?
Inland Revenue replies: "Your lump sum payout of KiwiSaver contributions upon reaching the age of superannuation is tax-free as the tax has already been paid. If you take that money overseas then [you] are liable for taxation on that money under [the overseas country's] rules when [you] start using the lump sum."
My wife and I are both hard-up retired Brits, aged 63. Can we join KiwiSaver? Would that be for five years? Are there tax advantages for us?
Any NZ resident under age 65 with the right to stay here indefinitely can open a KiwiSaver account. Yes, it would have to be for five years - it's five years or age 65, whichever is later.
If you're not in employment (either employed or self-employed), you can contribute as much as you like. The required minimum of 4 per cent of your income applies only to income from employment.
And yes, there would be financial (though not tax) advantages. If you both open accounts, you would each get the $1000 Government kick-start plus the Government subsidy matching your contributions up to $20 a week each, plus a subsidy on your fees of $40 a year each.
There is, however, no tax deduction for your contributions to KiwiSaver. You still pay income tax on your total income, including what you pay into KiwiSaver.
What part(s) of an individual's pay is used to calculate the 4 per cent contribution to KiwiSaver? For example, are overtime and any other allowances included, or just the base salary?
An employee's 4 per cent or 8 per cent contribution is based on your gross wage or salary before tax, including overtime, bonuses, commission and any other taxable allowances, but not non-taxable reimbursements for costs.
Is the 4 per cent deducted like so: say $100,000 gross income, $4000 to KiwiSaver as a net amount? Is the tax paid on $96,000 or $100,000? Is the fund taxable?
Yes, the 4 per cent is 4 per cent of your gross income. You will still pay tax on your gross income of $100,000. As noted above, there is no tax deduction for the 4 per cent contributed to KiwiSaver, so effectively you are paying $4000 out of your net income of approximately $68,430 (5.8 per cent of your net income).
Your KiwiSaver provider will also pay tax of 30 per cent on its earnings each year.
However, your employer will not have to pay withholding tax on its contributions to your KiwiSaver account, and of course the Government will pay both you and your employer a gift matching your contributions of 4 per cent of your income up to $20 a week each.
The final lump-sum or pension paid out after you turn 65 will be tax-free.
Who is eligible to charge fees - Inland Revenue and fund managers or fund managers only? At what level?
Inland Revenue will not charge you for collecting your contributions and passing them to your KiwiSaver provider.
KiwiSaver providers will charge varying fees. Bruce Kerr from the Association of Superannuation Funds says the six "default providers", which will get your savings if you don't choose another provider, have announced "administration fees" of around $3 a month ($36 a year).
The Government will effectively cover this cost through a fee subsidy to all KiwiSaver accounts of $40 a year.
However, Mr Kerr says providers will also charge "investment management fees" ranging from about 0.25 per cent to 0.5 per cent of the money invested. Full details for default providers are available at: www.workplacesuper.org.nz/kiwisaver.asp
Is this KiwiSaver compulsory? Is it worth putting my money in this KiwiSaver?
No, KiwiSaver is voluntary. But all the commentators since the Budget have noted that you'd be a fool not to join if you possibly can, because if you put in 4 per cent of your income you'll get gifts of a matching 4 per cent from your employer (from 2011) and another matching 4 per cent up to $20 a week, plus a $1000 cash "kick-start", from the Government.
Every employee aged 18 to 64 inclusive who starts a new job after July 1 this year will be enrolled in KiwiSaver automatically, with a right to opt out between your second and eighth weeks in the job.
The only exceptions to this will be in jobs where employers have been exempted because they have existing super schemes which are at least as good as KiwiSaver. Even in those companies, employees will be free to opt into KiwiSaver voluntarily either in addition to or instead of joining the company scheme.
The other big element of compulsion is that once you opt into KiwiSaver, your employer has to match your contributions, starting at 1 per cent of your income from next April and rising to 4 per cent from 2011.
How safe is the KiwiSaver? With no government guarantee and superannuation funds having gone bust in the past, how can I assure myself my funds will still be around when I turn 65? Or whether I will get less than my contributions should the superannuation funds not perform at all? All my hard- earned money will go down the drain.
The questioner is correct - there is no Government guarantee for money in KiwiSaver schemes.
You will need to decide how much risk you want to take. Most KiwiSaver providers will offer a variety of schemes with varying levels of risk. The safest schemes, including the six "default providers", will put most of your money into fixed-interest deposits, while the riskiest will put more into shares.
In general, financial advisers say younger people can afford to take more risks because you've got plenty of time to make up any short-term losses.
Older people who are closer to retirement are advised to choose safer KiwiSaver options.
