KiwiSaver changes being initiated by the Government are one step closer after the bill that includes the changes passed its second reading in Parliament. So what are the changes proposed to take effect on 1 April 2019 and how might they affect you?
1. More contribution rate options!
The bill would increase the number of options that you have to contribute from your salary or wages with the introduction of two new contribution rates: 6% and 10%. This gives you more flexibility which is always a good thing, and can make it easier to gradually increase your contributions over time so that you notice the impact less.
2. Changes to the contributions holiday
Two changes have been proposed to the existing KiwiSaver contributions holiday. The first is the name, with it set to become a Savings Suspension. Fair enough too, a holiday can make it sound like a good thing can’t it? And a holiday isn’t really a holiday if it costs you in the long run. The reality is not contributing now could mean you a missing out on a lot more in the future – one of the reasons for this the investors best friend: compounding returns.
The second is that the maximum period you can take a “Savings Suspension” is being reduced to 12 months, and after that you would need to reapply. This is a reduction from the current maximum timeframe of five years (although if you are currently on a contributions holiday with a period of more than 12 months the end date of that holiday will not be changed). If you’re on a holiday this could be a great time to reassess whether it’s time to take the leap back into KiwiSaver.
Nothing is certain until the bill is passed into law. We’ll keep you in the loop and let you know when these changes are confirmed, or if the Governments plan changes. If you need any help with your KiwiSaver account before then, get in touch and one of our team can help you out.