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KiwiSaver KiwiSaver Document Transcript

  • KiwiSaver Seminar 2: Decision-making Facilitator’s Guide
  • The Retirement Commission helps New Zealanders prepare financially for retirement, through education, information and promotion. We created www.sorted.org.nz, which is full of tools and information, to help Kiwis of all ages understand money matters and manage their personal finance throughout life. If you have feedback on this seminar material we’d appreciate hearing from you. Please e-mail the Sorted team at office@sorted.org.nz. Disclaimer Every effort has been made to ensure accuracy in this guide. However the information contained in it is necessarily generalised. The Retirement Commission will not be liable for any reliance placed upon it by any person or for any errors, omissions or incompleteness in this guide. By using this guide and the associated PowerPoint presentation you agree that you may not and will not:  Give advice, promote or recommend any particular KiwiSaver scheme or any superannuation scheme or  Give general financial advice or promote or recommend any financial product during any seminar you present. If you breach this agreement, the Retirement Commission may pursue any rights or remedies available to it at law or in equity.
  • KiwiSaver is the Government’s initiative to help New Zealanders save for their retirement through the workplace. This guide helps you, as presenter of the seminar, understand what KiwiSaver is about so you can effectively present the concept to others. It also includes notes for each slide of the PowerPoint presentation to guide you through your presentation. For more about KiwiSaver once you’ve read the introductory information, please see: • Inland Revenue’s KiwiSaver Employer Guide • Inland Revenue’s KiwiSaver Employee Information Pack • Inland Revenue’s KiwiSaver website kiwisaver.govt.nz • KiwiSaver questions and answers at treasury.govt.nz/budget2007 • Retirement Commission’s free and independent personal finance website sorted.org.nz What’s in this guide? 1. Purpose of the presentation 2. Material you need to present effectively 3. Hand-outs for participants 4. Introduction to KiwiSaver for presenters 5. Presentation guide
  • 1. Purpose of this seminar There are two seminars you could use to present KiwiSaver to an audience:  The first seminar – Basic Rules - helps people understand how KiwiSaver works  The second seminar (this one) has information to help people make informed decisions about about KiwiSaver. We recommend allowing participants to attend both seminars where you believe a discussion (especially around KiwiSaver’s basic rules) will help their understanding of KiwiSaver. If they are aware of KiwiSaver’s basic rules (by reading Inland Revenue’s Employee Information Pack for example), go straight to this KiwiSaver decision-making seminar. Know what you’re presenting The seminar should take just under an hour and we’ve included some suggested timings for each presentation slide to help you keep track of time. Before you present for the first time it is important to familiarise yourself with the concept of KiwiSaver and the structure of this seminar. 2. Material you need to present effectively You will need:  A whiteboard and marker or something similar  Pens and paper for employees to take notes  A computer and data-show to run the PowerPoint presentation or  An overhead projector with the PowerPoint presentation printed on transparencies.
  • 3. Hand-outs for participants Provide all participants with:  The Sorted KiwiSaver Decision Guide. These are available for free and can be ordered from the Sorted website under KiwiSaver > For Employers > Order or download Sorted resources > Order KiwiSaver decision-making resources. Allow five working days for delivery.  The Participants’ Worksheet so that participants can keep track of the presentation and take notes. Print out and photocopy the worksheet so every participant has a copy.  Inland Revenue’s KiwiSaver Employee Information Pack. These can be ordered by calling 0800 257 777. Other free materials that can also be ordered from the Sorted website under KiwiSaver > For Employers > Order or download Sorted resources > Order KiwiSaver decision-making resources, are:  KiwiSaver Decision Guide posters  Making a Budget That Works leaflet – for people who need help with making a budget before deciding on KiwiSaver. 4. Introduction to KiwiSaver for presenters KiwiSaver is the name of the Government’s workplace superannuation scheme that starts on 1 July 2007. The scheme is administered by Inland Revenue and provided by independent investment organisations that have been approved by the Government as KiwiSaver scheme providers. It is not compulsory for anyone to join KiwiSaver, but when an employee changes jobs their new employer will automatically enrol the employee into KiwiSaver. If the employee decides not to stay in the scheme they can opt out by letting their employer know within 8 weeks of starting their new job. Existing employees aren’t automatically enrolled and can join KiwiSaver any time by letting their employer know. The self-employed and those outside the workforce can contact a KiwiSaver scheme provider and apply directly. Who can join? Anyone under 65 (the current age for NZ Super) who’s a New Zealand citizen or who is in New Zealand and is entitled to work here permanently can join KiwiSaver. Employee savings Employees have the choice of saving 4% or 8% of their pay (before tax is taken out). Their savings are deducted from their pay and deposited straight into their KiwiSaver account. Choosing a KiwiSaver provider Employees can choose their own KiwiSaver provider. If their employer has a preferred provider the employee might like to select this provider. If the employee hasn’t selected a provider after 8 weeks of starting their new job, then Inland Revenue will randomly choose a provider for them (from a group called ‘default providers’).
  • Benefits of joining For employees KiwiSaver has many benefits, including:  $1,000 tax-free kick-start payment from the Government that’s paid into their account when it’s opened.  Up to $1,040 a year from the Government to match the first $1040 saved by the employee in a year (this is called a ‘member tax credit’ and anyone 18 or over can get it). This will be paid until your able to access your savings (i.e. age of eligibility for NZ Super, 65 years of age, or after 5 years membership whichever is later).  $40 every year to help pay account fees.  Employer contributions of 1% of the employee’s pay from 1 April 2008, increasing by 1% each year until it reaches 4% in 2011, where it will remain.  First home subsidy of up to $5,000 ($1,000 a year over 5 years) for first homebuyers if they qualify. This money can be used for a deposit on a first home after 3 years of saving.  One-off withdrawal from their KiwiSaver account after 3 years of saving to help pay for a deposit on their first home (excludes the $1,000 kick-start payment and the member tax credit).  Use up to half of the employee’s regular savings after 12 months to help pay off their mortgage. First home buyers Members have to meet certain conditions to get the first home subsidy. These are:  Household income: o $100,000 or less a year if there’s one or two KiwiSaver members buying the home, or o $140,000 or less a year if there’s three or more KiwiSaver members buying the home.  House price: o $400,000 or less in higher-priced areas such as Auckland City, North Shore and the Queenstown lakes district, or o $300,000 or less for the rest of New Zealand. Taking money out The employee’s money is locked in and can’t be taken out until they’re 65, except if they:  Are making their first home withdrawal  Are experiencing significant financial hardship  Are seriously ill  Move overseas permanently. In the case of death, their estate gets their money. Stopping payments After 12 months of saving the member can take a break from making regular payments to their KiwiSaver account for between 3 months and 5 years. This is called a ‘contribution holiday’. There is no limit to the number of times members can take a contributions holiday. Existing super KiwiSaver can run alongside any existing super scheme your organisation or employees may have. If an employee already has a super scheme going they may be able to:  Switch to a KiwiSaver scheme with the same provider, or  Keep the existing scheme and have a KiwiSaver scheme going at the same time.
  • 5. Presentation guide Use this section to guide you through the PowerPoint presentation to your staff. To make it easier this guide provides extra information to clarify details or make the presentation more interesting:  Note – background information you could use to explain the information presented, or use the text as a rough script for your presentation  Activity – suggested activity to get participants involved in the workshop Slide 2 What we’ll cover today 5 mins 1. Make sure all participants have a copy of the Sorted KiwiSaver Decision Guide and the Participants’ Worksheet. 2. Read out the topics to be covered. 3. Tell them that by the end of this presentation they should know enough to make a more informed decision about KiwiSaver. 4. Let participants know they can ask questions. 5. Before showing slide 3, use the following icebreaker to get people comfortable in their surroundings. Icebreaker Ask participants: Hands up who did the first seminar? Hands up who didn’t? Then ask: What do you know about KiwiSaver? You may want to write the answers on a white board. Then ask them to take a few minutes to read the key features of the Sorted KiwiSaver Decision Guide before moving onto slide 3. Slide 3 How much do I need to retire? 2 mins Note: Regardless of whether you join KiwiSaver or not, you will still get New Zealand Super to help you in your retirement.However KiwiSaver could mean you’re better financially prepared for your retirement. To work out how much you’ll need when you retire, use the Quick Retirement Calculator at sorted.org.nz. Slide 4 How does KiwiSaver work? 3 mins Money goes into a KiwiSaver account Note: When you join KiwiSaver you open a KiwiSaver account and your savings go into this account. A KiwiSaver account is sort of like a bank account – it stays open no matter where you work. Save either 4% or 8% of your pay Note: You have two choices for the amount you will save – either 4% or 8% of your pay before tax is taken out. But you can make lump sum payments whenever you like.
  • You can’t touch your savings until you’re 65 (except in rare situations) Notes: With a KiwiSaver account you can’t withdraw from or close your account until you’re 65, except in certain situations such as:  You make your first home withdrawal  You move overseas permanently  You are experiencing significant financial hardship  You become seriously ill If you die, your money goes to your estate. Savings earn interest from investment fund Note: Your savings are put into a KiwiSaver account that invests your money in an investment fund. We talk more about this later. Slide 5 Why join KiwiSaver? 10 mins The pros and cons listed on this slide and slide 6 are listed in the Sorted KiwiSaver Decision Guide. $1,000 kick-start Note: Everyone who joins KiwiSaver gets $1,000 from the Government that goes straight into their KiwiSaver account after they have been saving for three months. Up to $1,040 a year in tax credits ($20 a week) Note: Every dollar you save will be matched by the Government as a member tax credit to the tune of up to $20 a week. Activity: If participants didn’t attend seminar 1, show example on a whiteboard how savings of $500 a year is matched by the Government at $500 a year, then show how savings of $2,000 a year is matched by the Government at a maximum amount of $1,040 a year. Your employer will contribute Note: From 1 April 2008, your employer has to help you save by making payments to your KiwiSaver account. The amount starts at 1% of your pay, gradually increasing by 1% every year until 2011, when it reaches 4%.The bonus is that these employer contributions will be tax free so your KiwiSaver account will get the full amount your employer gives you. Activity: If participants didn’t attend seminar 1, do this activity: Take an average salary of participants and show on your whiteboard how much they get from their employer from 2008 if their employer contributes 1% of pay in 2008; 2% in 2009; 3% in 2010; and 4% from 2011 onwards. Note: This amount goes on top of your own savings.
  • Help with a first home deposit Note: When you open a KiwiSaver account you may be able to get up to $5,000 from the Government as well as make a withdrawal from your savings for a deposit on your first home. Savings you can’t touch Note: You can’t touch your KiwiSaver funds until the age you qualify for New Zealand Super (currently 65). Easy to manage as it comes straight out of your pay Note: With KiwiSaver your money comes straight out of your pay so if you’re not a natural saver, that could be a plus. Can put your contributions on hold Note: After 12 months of saving you can stop your regular payments to your KiwiSaver account for between 3 months and 5 years by taking what is called a ‘contribution sholiday’. There’s no limit to the number of times you can take a contributions holiday. To take one, simply let Inland Revenue know. Slide 6 Any reason not to join? 5-7 mins The pros and cons listed on this slide and slide 5 are listed in the Sorted KiwiSaver Decision Guide. You can’t afford 4% of your pay Note: If you’re finding it hard to make ends meet and can’t afford to have 4% of your pay locked in to a savings scheme, then KiwiSaver may not be for you. It is more important to pay your bills and feed your family than save. After all, you will get NZ Super when you retire. Do a budget to work out whether you can afford to contribute. If you’d like help, try the Budget Calculator on sorted.org.nz or call 0800 SORT MONEY (767 866) to speak with a budget adviser. You’d rather pay off high-interest debt first Note: The interest you pay on things such as credit cards, hire purchases and personal loans is likely to be much higher than the returns you’ll get from KiwiSaver. Some think it’s a good idea to pay off your high-interest debt before you start putting money away for savings. Remember, you can join KiwiSaver at any time and it’s never too late to join. You don’t want your savings locked away until 65 Note: In most situations you can’t touch your KiwiSaver funds until you qualify for New Zealand Super (currently 65). If you think you’ll need the money before then, you might be better off putting your money somewhere else.
  • You have a super scheme that your employer contributes to that’s better for you Activity: If participants have an employer-subsidised super scheme going already, provide them with the contact details of the person to talk to about that scheme and how it compares to KiwiSaver. You have a retirement income plan that is at least as good or better Note: Again, weigh up the pros and cons of your own plan compared to KiwiSaver to help you decide. Slide 7 Is it for me? 5 mins This list is printed on the back panel of the Sorted KiwiSaver Decision Guide called What’s the Result? You can afford 4% of your pay Note: 4% of your pay is the minimum amount you can save with KiwiSaver. So if you find you can afford to save 4% after doing your sums, (use the Budget Calculator on sorted.org.nz) then perhaps KiwiSaver is for you. Your employer makes contributions now Note: From April 2008 your employer had to match your contributions to KiwiSaver starting at a minimum of 1% of your pay, and increasing by 1% each year until it reaches 4% in April 2011. Your employer may contribute more than these amounts and they don’t have to wait until April 2008 to start. Employer contributions in amounts that match yours will be tax-free up to a limit of 4 % of your before tax pay. You plan to buy your first home in the next 3-5 years and you’re eligible for the subsidy Note: After 3 years of saving, first home buyers can make a withdrawal from their KiwiSaver account and put the money towards a deposit for a first home.They may also be able to get a first home subsidy of up to $5000 ($1000 a year) for the first 5 years of saving – but only some people will qualify for this. Activity: If participants didn’t attend seminar 1, write down these conditions or talk about them briefly: Your price of your first home has to be:  $400,000 or less if you live in Auckland City, North Shore or the Queenstown lakes district, or  $300,000 or less if you live anywhere else. Your household income also has to be:  $100,000 or less a year if there are 1 or 2 KiwiSaver members buying the house, or  $140,000 or less a year if there are 3 or more KiwiSaver members buying the house.
  • You are over 60 but not yet 65 Note: While it may be a little late to save for your retirement, you can still join KiwiSaver to get the $1,000 kick-start and the member tax credits of up to $1040 a year for up to five years (as long as you contribute at least $20 a week) as well as your employer’s contributions while you are working. You then get a lump sum payment with all the extra money in five years’ time – as this is the shortest amount of time people over 60 can be in KiwiSaver for. It’s time to start saving for retirement Note: If you’ve been thinking about saving for your retirement for a while, now may be a good time to start. Slide 8 Where do I invest? 5 mins See sorted.org.nz Note: sorted.org.nz has information about investments options and risk profiles. Activity: Hands up who knows what an investment fund is. Write the answers on a whiteboard. What types of investment does an investment fund make? Write the answers on a whiteboard. Notes: Investment funds invest your money in different types of investments, such as cash, shares, Government bonds and property. The investments could be in New Zealand or overseas. The amount of your interest (or returns in investment speak) differs week by week or even day by day, depending on how your fund is doing. Decide on your risk profile – check out the Risk Recommender calculator at sorted.org.nz Note: You could also discuss your financial situation and goals with an independent financial adviser - they may be able to advise you about your level of risk and what may suit you best. Decide on your investment type – check out the Investment Recommender calculator at sorted.org.nz Note: There are lower-risk funds such as cash and bonds, and higher-risk funds such as property and shares. You need to be comfortable with the level of risk you take. Plug your details into the Risk Recommender and Investment Recommender to help you decide how much risk you’re willing to take for your investment.
  • Slide 9 Who do I invest with? 5 mins Notes: There are lots of things to look out for when choosing a KiwiSaver scheme provider. Investment choices Note: No-one can predict future KiwiSaver returns. After completing the Risk Recommender and Investment Recommender at sorted.org.nz consider the choices on offer. Fees Note: All scheme providers will charge a fee to manage your KiwiSaver account. Use the Fees Comparison in the KiwiSaver for Employees section of sorted.org.nz (available late June 2007). With KiwiSaver you’ll get $40 a year from the Government to help pay your KiwiSaver fees. Investment returns Note: The amount of returns you get back is very important as this is why you have an investment in the first place. However, an investment’s past performance is no indication of how it will perform in the future – so you should not base your decision on this alone. Communication Note: Providers communicate with their customers about what they’re selling and how well their investments are performing, in different ways and at different intervals. Before signing up a provider, get hold of some of the material – the KiwiSaver scheme’s booklet, a sample member statement, a newsletter and advertising pamphlet – do you follow what they’re telling you? You need to know what to expect and be comfortable with what they offer. Reputation Note: There are many KiwiSaver scheme providers providing many different funds. When choosing a provider it’s really important you choose a provider that has a good reputation. The size of organisation and how long they’ve been around might be some indication of their reputation. Allow savings to pay off mortgage Note: We mentioned earlier that one of the benefits of KiwiSaver is being able to use up to half of your own contributions to help pay off your home loan. This is called mortgage diversion. Not all KiwiSaver scheme providers allow this service so check with the provider before you sign up. Other related services Note: There are other things you might want to use a provider for in the personal financial service area such as for insurance or banking. A provider may offer you a better deal if you decide to use a number of its services including KiwiSaver.
  • Slide 10 Who are KiwiSaver scheme providers? 3 mins Any company approved by the Government Note: There are many providers offering many different investment fund options. You choose your own provider and investment fund Note: There are different types of funds, depending on how much investment risk you’re willing to take. The general rule is the lower risk the fund, the lower your long-term returns are likely to be over the next 10-40 years, and the higher risk the fund, the higher your returns are likely to be. Find a fund you are comfortable with. It’s best to choose your own provider so that you get the provider you want. If you don’t choose a provider:  Your employer may select a chosen provider, or  Inland Revenue will randomly allocate a provider to you (there are 6 ‘default providers’) Note: Your employer may have a chosen provider. It’s best to choose your own provider so that you get the provider you want. You should then choose an investment fund you are comfortable with. Slide 11 To recap 2 mins KiwiSaver may suit most but not all Note: List some examples from slides 5 and 6. Refer participants to their copies of the Sorted KiwiSaver Decision Guide or the Sorted KiwiSaver Decision Guide poster if you have some on display. Some reasons why KiwiSaver may not be for you Note: Tell them again that KiwiSaver isn’t for everyone and there’s no rush to join. They can join any time. Different types of investments for different people Important to choose a scheme provider carefully It’s your decision
  • Slide 12 Find out more 10-15 mins Help with decision-making • sorted.org.nz Help with budgeting • 0800 SORT MONEY (767 866) More information about KiwiSaver • kiwisaver.govt.nz • 0800 KIWISAVER (549 472) Note: Ask participants if they have any questions. You may find the questions and answers on Treasury’s website at treasury.govt.nz/budget2007 useful for answering these.