Six moves to boost your KiwiSaver balance
It can be difficult making decisions for the future when many of us have the day-to-day pressures of the here and now, but boosting your KiwiSaver fund does not have to cost money. Canstar looks at six ways to improve your balance without throwing money down the drain on fees.
Canstar general manager Jose George says:
“To get the best out of your KiwiSaver you need to invest a bit of time as well as money. Just checking in from time-to-time can give you the opportunity to make changes that can result in substantial difference to your retirement fund.”
So how can you increase you KiwiSaver balance?
1. Increase your regular KiwiSaver contribution
The most obvious way to grow your KiwiSaver account balance is to put more money into your fund. Most employed KiwiSaver members contribute at the default minimum 3% of before-tax salary but this can be increased to as much as 8%. This approach is also pretty flexible as KiwiSaver allows scheme members to change their contribution rate every three months.
2. Make one-off voluntary contributions
Got a tax refund or an end of year bonus? Paying it into your KiwiSaver account is quick and easy. Simply log onto your online banking, choose the “Pay Tax” option, enter your IRD number, and enter tax types “KSS” and period “0”.
3. Escape the default fund
If you didn’t choose a fund when you enrolled in KiwiSaver, and are still in that fund, chances are you’re in the conservative fund of a default scheme. Generally speaking these are designed to reduce the potential for frequent and large drops in balance and are generally suitable for those looking to access their KiwiSaver funds within the next two to six years. Moving to a fund with a greater exposure to growth assets like property and shares, to should typically give a better long-term return.
4. Minimise your KiwiSaver account fees
In the 2017 KiwiSaver ratings, Canstar analysed a number of providers and schemes across six fund types: aggressive, growth, balanced, conservative, defensive and cash. We found the difference in the fees being charged could make a huge difference to how much a KiwiSaver member could save. For example, in balanced funds we found a difference of $123.30 between the most expensive fees of $218.85 and the lowest of $95.55 (within the same fee category).
If your child (under 18 years of age) has a KiwiSaver, look for a fund that offers waivers or discounts on fees.
5. Make sure you get a member tax credit
If you’re between 18 and 64 years old (or older if you have been a member of KiwiSaver for less than five years), then you’re entitled to an annual tax credit of up to $521.43 from the government. It’s automatic if you have personally contributed at least $1,042.86 a year (1 July to 30 June), but contact your KiwiSaver provider if you’re not sure.
6. Take interest in your KiwiSaver statement
It really does pay to take an active interest and keep track of your investment. Read your member statements as well as any newsletters, to get a better understanding of how and where money is being invested on your behalf. It’s fair to say that they don’t tend to be the easiest documents to understand but online help is available at places such Canstar or sorted.org.nz.
“The more informed you are as a KiwiSaver investor, the better the decisions you’ll be able to make, and this should help you to land up with a healthier retirement fund or reaching that first-home deposit sooner.”