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17 Mar 2016
“The Retirement Expenditure Guidelines 2015” concluded that “most New Zealanders will need to save through their working lives if they aspire to a better standard of living in retirement than NZ Superannuation alone can support.” Most Kiwi’s aspire to a retirement with some choices, rather than one with no frills, and KiwiSaver can help them achieve that reverie.
KiwiSaver has a range of benefits for members including contributions from the employer and the government that help the employee grow their retirement nest egg. There may also be some benefits for KiwiSaver members when purchasing their first home. The employee can choose to contribute 3% (default), 4% or 8% of their gross pay. The employer must provide a minimum contribution of 3%, but may contribute at a higher rate as part of the employee’s remuneration package.
As an employer, you are a collection agent for the Government for the contributions to KiwiSaver and there are a number of legal obligations you must fulfil.
Employers must deduct KiwiSaver contributions from all new employees (subject to the specific exemptions mentioned below) whether they already belong to a KiwiSaver scheme or not. The steps for enrolling a new employee into KiwiSaver are simple:
Your monthly employer return will include;
Some employees are exempt from the compulsory enrolment requirements, though they may choose to enrol. These include employees who are; under 18 or over 65, a temporary or casual employee, or those on a work permit or visa. Your accountant or the IRD can provide a full list.
On the KS 2 form, your employee makes their choices on their contribution rates and the KS 1 is the form the employer uses to tell the IRD.
“The steps for enrolling a new employee are simple.”
There are some points to be aware of:
The process is automatic. There are a number of default schemes one of which will be chosen for your employees contributions to go to. Most will leave it there but it may be in their best interest to seek advice about other options. Unless you are an independent financial advisor, you can not give the employee financial advice.
As employers, you know how important it is for your employees to save for their retirement. There are a couple of handy websites which explain KiwiSaver and the rules:
www.sorted.org.nz/#/guides/KiwiSaver-how-it-works and the IRD site - http://www.ird.govt.nz/KiwiSaver/ . Your tax advisor will also be able to advise regarding employer obligations.
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