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KiwiSaver makes it through
KiwiSaver turns five
in July 2012, having weathered a global financial crisis and tinkering by successive governments.
This milestone means the first savers will begin to benefit. Around 75,000 people – those who are aged over 65 and have been in the retirement scheme for five years – will be eligible to take their money out.
It is up to the individual to decide whether to leave the money in the KiwiSaver scheme, or take it out in one lump sum or in regular withdrawals – although if all the money is withdrawn, the account is closed and the individual will not be able to rejoin KiwiSaver.
Experts expect people to use their KiwiSaver funds rationally. “We don’t expect hordes of 65-year-olds to cash up and party until it’s all gone,” says Andrew Gawith, a director of Gareth Morgan Investments.
Many people decide to cash up all their investments at 65 and put the money in the bank, but, according to Jeff Matthews of Spicers Wealth Management, the low interest rates for bank savings accounts mean the investments don’t keep up with the rising costs of living.
KiwiSaver is a low-cost way to invest in higher-growth investments such as shares and property, and Matthews says that if people can keep contributing after age 65, that’s even better.
That said, the benefits of staying in KiwiSaver will be reduced. The Government and often employers cease contributions once an individual turns 65.
David Boyle, general manager of funds management for ANZ Wealth and OnePath, says that when KiwiSaver was launched, the biggest uptake for active investors (those who chose to join the scheme rather than being auto-enrolled) was from people nearing retirement.
“Consequently, large providers like us will have a greater bubble in that age group,” says Boyle. OnePath alone has 3000 members who will be able to pull their money out in July. With an average balance of $15,000, that is $45 million that could go back to investors.
Numbers at a glance
• 1,970,000. The number of people expected to be in KiwiSaver by July 2012.
• 75,000. The number of people who will turn 65 between 1 July 2012 and 30 June 2013 and be eligible to take their money out of KiwiSaver.
• 17,500. The number of people who will be eligible to withdraw their money in July 2012.
Source: Pre-Election Economic & Fiscal Update 2011
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