Giving a toddler Kiwisaver
It can be done but there’s red tape to negotiate, writes Shelley Hanna
QI amthinking of opening akiwisaver account for my2-year old grandson andputting in a lump sum. Howdoidoit? Canyou recommendahigh-growth provider? At his agehecan afford to take a fewrisks. Wouldhebe eligible for the annual Governmenttop-up?
AOpening akiwisaver account for grandchildren is a great idea, but there is red tape involved. You can’t do it yourself. As he is under
16, the application must be signed by both parents or guardians. His parents surely will be delighted you intend investing a lumpsumon his behalf. Themoneywill havemany years to grow and will be a great help tohim one day eitherwhenbuying his firsthomeor furtherdownthe track as retirement savings.
Whatismore important to you— ease of setting upthe account, or returns?
If returns are most important, use the Fundfinder tool on the Sorted website. There you can sort over 260 Kiwisaver funds according to fees and performance. The usual warnings about past performance apply, but the ranking is very helpful in sorting the wheat from the chaff. There are 63 growth funds listed. The average return is 6.10 per cent per annumover the past five years to June 30, 2020. If you drilldownyou will see that the top-performing fund has averaged 14 per cent perannum while the worst achieved just 2.82 per cent per annum. Both were singlesector funds from thesameprovider
— the first investing innzshares and the other in Australian shares. You would be wise to choose adiversified growth fund rather than putting all your eggs in one basket.
Youcan select a provider from this list and contact it for help in signingup your grandson. Some providers allownewmembersto signuponline. If you choose this option, the child’s parents will have to upload images of either their driver’s licence or passport plus the child’s birth certificate. They also enter theirhomeaddress, and this is verified online. The child must have an Irdnumber to join Kiwisaver (if his parents didn’t apply for thiswhen they registered the child’s birth they can submit an IR595D form).
If you prefer to deal with a “real person” then consider a provider that the child’s parents have an existing relationship with (either akiwisaver account or bank account). They will need appropriate ID for themselves plus the child’s birth certificate.
It is important to consider the impact of fees. The Fundfinder tool is helpful here. Returns are quoted after fees, but in the case of children it is the monthly admin fee that you have to watch out for. At about $3 permonthit can havemoreimpact on a low-balance account than the fund manager’s fee. Asmallnumber of fund managers waive the admin fee for children and that can be very helpful.
Your grandson won’t receive any Government contributions until he is older. These start at age 18 and work out to $10 perweekfor every $20 ormore that he contributes.
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 going to peak.net.nz.
The information contained in this article is of a general nature and is not personalised. Send your questions
about Kiwisaver to shelley.hanna@peak.net.nz