Fund won’t change with drawdowns
Your KiwiSaver with Shelley Hanna
I am 67 and have been retired since May 2015 and so far have not had to draw down on my KiwiSaver, as my wife has been working until now. Where else can you get a better interest rate? We have heard that if we want at any stage to draw down some of my KiwiSaver fund, we will have to give 31 clear days’ notice of intention. Is this so and can one make partial withdrawals? Also, does the fund, after breaking into it, just become a term deposit or on call investment? I am with one of the default providers.
KiwiSaver members have indeed been enjoying good returns over the past few years, but this should not be referred to as an ‘interest rate’ — this term is used to describe investments that pay a specified rate of interest such as a bank term deposit. Unless you are in a cash or fixed interest type fund, the return you are getting from your KiwiSaver is largely dependent on the value of the underlying investments and may go up or down depending on what is happening in sharemarkets around the world.
I am somewhat surprised that you passed the age of 65 with no word from your provider on your options. Your provider is charging you fees to look after your money, and those fees should cover all aspects of their service including providing relevant information to you. I asked the Financial Markets Authority what they expect from providers, and a spokesperson replied: “There are no requirements for providers on how they must manage KiwiSaver fund drawdowns, but we do expect providers to help and support members. This will become increasingly important as the number of people accessing KiwiSaver funds in retirement increases.”
Once members reach the age of entitlement for NZ Super they can withdraw money from their KiwiSaver — as long as they have been a member for at least five years. Look for a Retirement Withdrawal form on your provider’s website or phone them on their 0800 number.
Members over 65 have several options. You can set up a regular withdrawal to your bank account (eg. fortnightly or monthly) to help fund your living expenses. You can also withdraw a lump sum from time to time to cover larger and sometimes unexpected expenses such as home maintenance, vehicle upgrade or health costs. Or you can withdraw all your money and close your account. If you choose this last option you will be unable to participate in KiwiSaver at any time in the future as you will be treated as a new member and only those under 65 can join the scheme.
The first time you apply to make a retirement withdrawal you need to be prepared for delays while you gather all the required documentation. Copies of documents must be certified, and you will need to sign the form as a statutory declaration in front of a JP or similarly authorised person. The reason for this is that you must declare any periods that you were not living in New Zealand while receiving Member Tax Credits. Anyone who receives Member Tax Credits in error will see that money repaid to the Crown. The first withdrawal could take up to 31 days but subsequent withdrawals are generally quicker and easier. KiwiSaver is a simple, low cost investment option and many members over 65 are happy to continue with their account.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz