May 2019 - Christian Kiwisaver Scheme
Changes to KiwiSaver – what do they mean for you?

Changes to KiwiSaver – what do they mean for you?

The Government has recently proposed some changes to KiwiSaver for next year.

More contribution rates for employees.

At the moment you can contribute at 3%, 4% or 8% of your pay.

From 1 April 2019, it’s intended that you’ll also be able to contribute at 6% and 10% of your pay.

This gets the big tick from us as it gives you more flexibility over the amount you save.

Perhaps review your level of contributions when you receive a pay increase, it’s a great time to take the opportunity to save a little more.

Savings suspension timeframe reduces

‘Contribution holiday’ changes its name to ‘savings suspension’.

From 1 April 2019, it’s intended that the maximum period for ‘savings suspensions’ reduces from 5 years to 1 year.

If you want to continue with a savings suspension then you’ll need to apply to Inland Revenue each year to renew it.

These two changes also get the big tick from us. A ‘holiday’ generally means good times, stopping your retirement savings might not be the best thing for you in the long run. During this time members also miss out on the government’s contributions of up to $1,042.86 each year (that’s potentially $5,214.30 over 5 years).

Removing the age 65 restriction on joining

At the moment people over 65 cannot join KiwiSaver. From 1 July 2019, it’s intended that the age 65 restriction on joining is removed and the 5 year lock-in period on joining is also removed. There is no change to the age at which you qualify to withdraw your KiwiSaver savings, this remains age 65.

This gets another big tick from us. KiwiSaver will be open to all New Zealanders and provide a convenient and cost-effective investment option to just holding your savings in a bank account or on fixed deposit.

From our perspective, it’ll also allow New Zealanders over 65 to join our Christian KiwiSaver Scheme and have access to investment funds invested under an ethical investment policy.

‘Free’ contributions from the Government

‘Free’ contributions from the Government

Every year the Government makes contributions to the accounts of eligible KiwiSaver members, up to $521.43 each. These contributions are usually credited to members’ accounts in early July. In 2018 the Government paid $753 million in contributions to KiwiSaver members. Did you get your share of that? Make sure you receive your $521.43 this year by contributing enough before 30 June 2019.

How much can I get?

The Government pays 50c for every $1 you pay in, but there is a limit. The Government’s money is credited to your KiwiSaver account. To get the maximum amount of $521.43 from the Government, you need to pay at least $1,042.86 each year. This equates to $20 a week. Here are some examples of how this works:

Your personal contributions Money from Government
Weekly Annual Annual
Over $20 Over $1,042.86 $521.43 max
$20 $1,042.86 $521.43 max
$15 $781.14 $390.57
$10 $521.43 $260.71
$5 $260.71 $130.35

If you are an employee and earn $34,762 p.a. or more, and contribute the minimum 3% of your pay to KiwiSaver then you’ll qualify for the maximum without having to do anything else.

If you want to receive the maximum amount for the year ending 30 June 2019 year then you can make a top-up contribution if you wish to do so. But this needs to be done before the end of June 2019.

Who can get this free Government money?

The Government will make an annual payment into your KiwiSaver account as long as you:

  1. have made personal contributions to your KiwiSaver account during the year;
  2. are aged between 18 and 65*; and
  3. were resident mainly in New Zealand.

*Eligibility for the Government’s money can extend beyond 65 if you have not been in KiwiSaver for 5 years; in which case it ceases after 5 years membership.

You can make personal contributions to your KiwiSaver account by deductions from your pay, or regular payments, or lump sum payments.

Not sure about your personal situation

You are welcome to contact us to check on your situation, or you can log on to your member section of the Christian KiwiSaver Scheme website to access your personal information.

Investment returns to 31 March 2019

Investment returns to 31 March 2019

It has been a very positive and pleasing quarter, a relief for most after the very shaky end to 2018, and a reminder to investors to focus on the longer term. Good returns were achieved by the funds in all periods to 31 March 2019.

The rebound in markets is put down to a number of factors including a reversal in the US Federal Reserve’s monetary policy stance, hope for a positive outcome in the U.S.-China trade deal negotiations and hope for further stimulus from the Chinese government, all factors that may lead to an increase in global growth in the second half of 2019. Given elevated asset prices and risks to future growth projections, we remain cautiously invested but alert i.e. we will be keeping an eye on economic data in the upcoming quarter to see it is strong enough to justify further gains.

Investment returns at 31 March 2019, before fees and tax:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.)
Growth Fund 8.3% 11.7% 10.5% 10.0%
Balanced Fund 5.8% 8.7% 8.1% 8.1%
Income Fund 1.9% 3.5% 3.9% 4.5%
Responsible investing

Responsible investing

There is a lot of jargon around these days that it is hard to keep up with.  What does responsible investing mean?  Is it just another piece of jargon that is boring or difficult to understand and bears no relation to our day-to-day life?

On a simple level, responsible investing could be like shopping for eggs in the supermarket.  When you find the eggs on the supermarket shelves, you are confronted by a range of different choices – bio organic eggs, paddock eggs, free-range, caged, cage-free, barn raised, and the list goes on.  There is such a wide variety of eggs you could select, with a range of prices to match your choice.  So how do you choose?  Would you buy solely on the price going for the cheapest eggs no matter what?  Or would you prefer organic eggs or maybe you are concerned for the chickens’ welfare and would not select eggs from caged chickens?

So on a personal level in this scenario, with the eggs, you could be considered to be behaving like a responsible investor.  You are deciding which would be the best eggs for you on which to use your money.

On a broader level, responsible investing is like that example of deciding which eggs you will buy.  When you (or your KiwiSaver provider on your behalf) are investing responsibly you are considering investments which reflect your values and possibly reflecting how a company is managing its responsibilities, say to the environment or its community.

Another name you may have heard is ethical investing.  It is a term that has been discussed a lot recently and is an alternative name for responsible investing.  Simply when investing, like buying those eggs from a supermarket, responsible or ethical investing is looking at not only the financial return (or the price) of the investment but whether that investment aligns with your personal (Christian) values.

You may recall either working for or hearing about, companies that were out to maximise their profit no matter the cost.  However, over recent years, there has been a change to balance the interests of shareholders with other stakeholders (e.g. the environment).

One example of this we will all have noticed recently is the big change to our supermarket shopping with plastic bags no longer being available to store our purchases.  There had been a community concern for the effect of plastic bags on our environment, with the sheer numbers in our landfills or in our oceans for example.  So because of the community concern with their use, supermarkets no longer use plastic bags.

Just as the community has become more concerned with issues, like plastic supermarket bags, there has also been a concern about where KiwiSaver funds are invested.  At Christian KiwiSaver Scheme we endeavour to avoid investments in such products as tobacco, guns and other arms manufacturing, gambling, and adult entertainment as they are out of line with Christian values. How companies behave with regards to the environment, their employees and others, how they govern themselves, and how they reward their management are things we also think about when making investment decisions.