Latest news with #RetirementCommission
NZ Herald
02-08-2025
- Business
- NZ Herald
KiwiSaver tips for self-employed: How to maximise retirement savings
Many in that situation opt to only contribute the amount required to get the maximum Government tax credit (and some don't even do that). But in this year's Budget that tax credit was halved, meaning you'll get a maximum of $260.72 from the Government provided you contribute at least $1042.86/year (and earn under $180,000). While that further waters down the appeal for the self-employed – in fairness it's still a 25% return and even before that change if that was all you were saving for retirement, you'd likely fall short of what you need. A report from the Retirement Commission last year suggested the Government increase its contribution for those who don't benefit from employer-matching – but I wouldn't hold your breath, especially when time is of the essence. So, if you're self-employed, what should you be doing with your KiwiSaver to ensure you're on track for retirement? Start with some number crunching I know, I know, 'figure out how much you'll need' sounds like tired advice. But it can be difficult to prioritise money going anywhere except into your bank account to fund your current existence unless you have a clear idea of why directing it elsewhere is essential. That starts with figuring out how much you might need in retirement and what you're currently on track to have. Websites like Sorted have brilliant calculators that can help you establish how much you'd have each week in retirement based on your current KiwiSaver settings – a number that might provide a wake-up call. Consider the best strategy for contributing One of the biggest challenges when you're self-employed is managing income fluctuations. Some months are killer, some are anaemic – and it's tricky to manage even just your regular fixed costs amid those ups and downs, let alone KiwiSaver. It's therefore worth considering how to make it work for your situation – to ensure it happens. For example, you could contribute a percentage of every invoice, so when times are lean less goes in, and vice versa. You could align payments based on the seasonality of your income or contribute a percentage of your profits when you do your GST (if GST registered) to ensure they happen. You could do a lump sum before the annual KiwiSaver balance date of June 30, but often big dollops of money are harder to find than smaller, regular amounts. Whichever method you choose, double check before June 30 that – at the absolute minimum – you'll qualify for the maximum Government tax credit. Review your fund type I'm beating a familiar drum here, I know – but I still come across people in their 40s who have perplexingly chosen 'conservative' funds, when they have decades before they can access their KiwiSaver, and are potentially missing out on significant returns. Don't make the same mistake. Consider a company structure I'll preface this point by saying: get good accounting advice, as there are many things to consider here aside from just your KiwiSaver. But to get you thinking – if you're operating as a sole trader, you and the business are one and the same, whereas if you form a company, the business is a separate legal entity. If you only take drawings from that company, as many business owners do, anything you put into KiwiSaver will be considered a drawing and taxed accordingly. However, if you pay yourself a PAYE salary as an employee of your company, the company contributes the 'employer' side of your KiwiSaver contributions, which becomes a tax-deductible business expense (noting here that employers pay an Employment Superannuation Contribution Tax based on the employee's tax rate, reducing the amount that goes into the employee's account). This isn't about avoiding tax but using legitimate structures to ensure you utilise a system that is currently not designed well for anyone who isn't an employee. But I repeat – take professional advice. Can you sell your business? KiwiSaver may not make up the entirety of your retirement nest egg even if you are an employee, benefiting from employer contributions, but the case for diversification goes double for those in business and contributing less – and your business could be one of those irons on the fire. For many small business owners, however, you are the business – and as soon as you're not working in it, it ceases to make money or be worth anything. But some could grow their business into something that has a life beyond their working years, and therefore potentially have some realisable value. I'm peppering in 'some' 'could' and 'potentially' because it isn't necessarily easy. It involves succession planning, investing in business assets, systems, IP, keeping personal costs separate, maximising profit, perhaps vendor financing. In short, it's not a small task, but if you have enough time and energy, there's potential. Just don't make it your only plan – business cycles can disrupt even the best-laid plans – which is why including KiwiSaver in your retirement planning mix is still worth considering.
RNZ News
26-06-2025
- Business
- RNZ News
Retirement Commission launches a new calculator to help make savings last
Photo: 123RF There is a lot of advice to help you work out how much you have to save to have a comfortable retirement, but not such much publicly available about how to spend your nest egg. But the Retirement Commission has now launched a new of tool - a first of it's type that is available free- to help you work out how much you can spend and when to make your KiwiSaver and other funds last. The Retirement Navigator - as it's called - is being described as a one-of-a-kind tool for spending in golden years. The Commission's Personal Finance Lead is Tom Hartmann.
Scoop
15-06-2025
- Business
- Scoop
New Sorted Retirement Navigator A One-Of-A-Kind Tool For Spending In Golden Years
A groundbreaking new Sorted tool has been released to help New Zealanders nearing or already in retirement feel more confident about their financial future and how to plan for it. Launched by Te Ara Ahunga Ora Retirement Commission, the retirement navigator is free to use on Working out how to turn a saved lump sum into a steady income to live on in retirement is a financially and mathematically challenging task. Partnering with the Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries (NZSA), the Retirement Commission has created a customisable tool that takes care of the calculations. Based on extensive modelling and drawdown 'rules of thumb' created by the RIIG, the retirement navigator addresses a common dilemma – how not to spend too much and run out of money or spend too little and unnecessarily compromise quality of life. Taking into account people's invested savings (for example, KiwiSaver) and NZ Super, the tool helps users determine the optimal income they can draw down over their retirement. By adjusting variables such as when they expect their retirement to start and their desired lifestyle, people can see how long their savings might last in different scenarios. Sorted's new retirement navigator is the first digital tool of its kind to be built by the Retirement Commission, and the first entirely new Sorted tool in several years. There are currently no other publicly available tools like it. 'There's a lot at stake for retirees when they start living off their invested savings,' says the Retirement Commission's Personal Finance Lead Tom Hartmann. 'They don't get any practise at it, or the option to go back in time and grow that money all over again. There are uncertainties about how long they'll live, how high prices will rise with inflation, how investment markets will do, and how much all of this will shape their lifestyle. 'It's been such a privilege to work alongside the RIIG actuaries and bring their modelling to life to enable people to forward plan. The retirement navigator puts it to real use for pre-retirees and retirees, so they can plan their spending wisely.' Recognising that retirement takes different shapes and forms, the new tool offers four rules of thumb to match personal preferences and lifestyles: * The Inflated 4% Rule: For those who are concerned about longevity and want to leave an inheritance. * The 6% Rule: For those wanting to spend more in their early retirement years. * The Life Expectancy Rule: For maximising income throughout retirement. * The Fixed Date Rule: For those planning to rely on NZ Super after a certain period. Each option comes with clear guidance and practical solutions to real-life financial challenges. The NZSA's Ian Perera, Convenor of the RIIG says, 'We're thrilled to see our work on rules of thumb for drawdown come to life thanks to Te Ara Ahunga Ora Retirement Commission. 'We always hoped people thinking about their retirement would find our work helpful, and the Sorted retirement navigator tool takes it to the next level of access and understanding. Moving from accumulating savings to drawing them down is not straightforward. We admire how Sorted's experts have embraced our actuarial work while making the retirement journey as easy to navigate as possible.' Sorted's retirement navigator tool aims to help New Zealanders: * Effectively integrate their NZ Super with other retirement savings * Make more informed decisions about their savings * Better understand their options for creating sustainable retirement income * Adapt their spending strategies as circumstances change * Approach and enjoy retirement feeling less stressed and more secure. Potential applications include use by KiwiSaver providers and financial advisers throughout Aotearoa when offering tailored guidance to clients and customers. Although intended for those who are nearing or already in retirement, the retirement navigator can be useful to people of any age who wish to examine how they might best manage their projected savings. Those who are more than a decade away from stopping paid work can forecast how much they're on track to have by using Sorted's existing retirement calculator and KiwiSaver calculator. To try the new retirement navigator, visit About Sorted and the retirement navigator Driven by Te Ara Ahunga Ora Retirement Commission to improve New Zealanders' financial wellbeing through accessible, actionable, relatable financial education, Sorted offers a range of free digital tools and calculators. Click here to view them: To read the new guide to using the retirement navigator, click here: About the New Zealand Society of Actuaries The New Zealand Society of Actuaries (NZSA) is the professional body for actuaries practising in New Zealand. It supports a highly specialised pool of around 400 members, of which around 250 are fully qualified actuaries. It sets, maintains and upholds actuarial professional standards and conduct, and supports members as they advance their skills and knowledge. NZSA also contributes to the development of actuarial thinking and its application through thought leadership activities, and provides a source of reference on actuarial matters for government and other interested bodies. NZSA's Retirement Income Interest Group (RIIG) provides a forum for Society members' concerns and ideas relating to retirement income, longevity and related issues. The RIIG has published significant work on retirement income including its drawdown 'rules of thumb'. See the RIIG's work here:
NZ Herald
26-05-2025
- Business
- NZ Herald
KiwiSaver: Cut-off for Government contribution nears – why funds could last 30% longer
The annual cut-off to receive the Government contribution is June 30. Despite the decrease in Government contributions, the Retirement Commission says most KiwiSaver funds should last 30% longer under new changes announced in Budget 2025. Those changes include minimum employee and employer KiwiSaver contributions moving from 3% to 3.5% from April 1 next year and then to 4% from April 1, 2028. This would offset decreases in the Government contribution. Analysis from the Retirement Commission found the contribution change should increase retirement savings for around 80% of contributing KiwiSaver members. For a 35-year-old on an average salary of $80,000, the change in contribution from 3% to 4% could result in a 25% higher KiwiSaver retirement balance at age 65. A 16-year-old earning $30,000, who is not currently contributing but intended to begin contributions at 18 pre-change, is modelled to have about 26% more in additional savings between 2025 and age 65, compared to 22% for a currently contributing 16-year-old. 'Our findings show that the increase of the default employee and employer contribution settings could result in retirement funds lasting on average approximately 30% longer than under the pre-Budget 2025 settings for median salary and wage earners who contribute without interruption over a 40-year working life,' said Retirement Commissioner Jane Wrightson. But for the about 200,000 members receiving only a Government contribution – including self-employed workers – the changes will result in a decrease in their KiwiSaver retirement savings balance, the analysis found. 'It's clear further work needs to be done to consider how we can better support the other 20% who are missing out on savings, which includes low-income earners, the self-employed and many women, Māori and Pacific peoples,' Wrightson said. The Retirement Commission said $1 billion was spent on the KiwiSaver government contribution last year. About two-thirds (2.2 million) of KiwiSaver members received a government contribution, with 77% of those receiving the full amount of $521.43. Finance Minister Nicola Willis told Ryan Bridge on Herald Now that the changes to KiwiSaver would provide people with 'a lot of financial security' and 'a much bigger nest egg'. Asked whether Kiwis would be worse off overall – by paying more now for our retirement later – Willis responded: 'I just don't accept that at all'. 'We are also doing other pro-growth, pro-wages policies including Investment Boost and other growth initiatives, so that overall we're confident that wages will keep growing,' Willis said.
RNZ News
22-05-2025
- Business
- RNZ News
Budget 2025: Retirement saving for 80 percent of NZers to increase under KiwiSaver changes, analysis finds
Photo: RNZ / Samuel Rillstone KiwiSaver changes revealed in Thursday's Budget are expected to increase retirement savings for about 80 percent of the scheme's contributing members, an analysis by the Retirement Commission has found. That's despite the reduction in government contributions to member's balances. From 1 July, the government contribution towards an individual's KiwiSaver is decreasing to 25 percent (i.e. 25 cents for every $1 contributed, to a maximum of $260.72). Anyone earning over $180,000 will not be eligible for any government contribution at all. Meanwhile, employee and employer contributions to KiwiSaver would move to a default of 3.5 percent from 1 April 2026 and then to 4 percent from 1 April 2028. Retirement Commissioner Jane Wrightson said the analysis revealed New Zealanders' KiwiSaver funds could last 30 percent longer than under pre-Budget 2025 settings - at least for median salary and wage earners who contributed without interruption over a 40-year working life. "This is great news for most KiwiSaver members but it's clear further work needs to be done to consider how we can better support the other 20 percent who are missing out on savings, which includes low-income earners, the self-employed, and many women, Māori and Pacific Peoples," she said. "While we're pleased to see the government take on board the key recommendations we made in 2024 around increasing the default contribution rate of 4 percent, I would at least have liked to see some of the savings from reducing government contributions be applied to serving these groups where we see the widest retirement savings gaps." Approximately 1.8 million salaried and wage-earning KiwiSaver members (90 percent) are expected to have higher eventual retirement savings balances, including those with incomes above $180,000. Generally, both low- and high-income earners would benefit from the change, but low-income earners would be more impacted by the decrease in government contribution as this made up a greater portion of their eventual retirement savings. About 200,000 members, or 10 percent, are not expected to benefit from the change. This includes people who already have employer and employee contributions at 4 percent and who are on low incomes or are close to age 65. Self-employed and unemployed people - who do not receive an employer contribution - would see a decrease in their KiwiSaver retirement savings balance compared to what they may have expected previously. The Sorted KiwiSaver Calculator has been updated so people can use it to see how the changes will impact them, the commission said. The Budget revealed employee and employer contributions to KiwiSaver would move to a default of 3.5 percent from 1 April 2026 and then to 4 percent from 1 April 2028. Photo: RNZ / Samuel Rillstone The analysis also revealed Thursday's changes could halve the $1 billion spent by the government on KiwiSaver contributions in 2024. About two-thirds of KiwiSaver members (2.2 million people) received the government contribution, with about 77 percent receiving the full amount of $521.43. While the changes might lower the governments bill, it would increase KiwiSaver spend for employers. Most currently contributed the minimum rate of 3 percent to KiwiSaver, Wrightson said, and a qualitative study with 25 business found a range of views on raising the minimum rate. "Not surprising, some, especially those in industries with tight margins such as hospitality, raised concerns about increased labour costs, reduced profitability, and flow-on effects to other areas of the business and employee remuneration. However, others, typically larger organisations or those with progressive HR policies, saw value in supporting employees' long-term financial wellbeing and were more open to higher contributions," she said. "We know these KiwiSaver changes will mean a higher cost for employers, but the gradual increases planned through the setting changes will give businesses the time they need to get ready. "It's important that this doesn't result in more businesses including KiwiSaver as part of total remuneration, as this is something we've been calling to be banned for some time." The commission will continue to explore the impacts of the KiwiSaver changes as part of its 2025 Review of Retirement Income Policies, with a focus on how the government could most effectively reduce gaps in retirement income outcomes. The final report is expected to be completed by December. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
