Kiwi Saver – What You Need To Know

Posted on by designerstrategy
Kiwisaver is a voluntary, work-based savings initiative with a range of membership benefits such as:
  • Member tax credits
  • Compulsory employer contributions
  • KiwiSaver HomeStart grant
  • Savings Withdrawal for first home

If you are buying your first home you can make a one-off withdrawal of some of your KiwiSaver savings to use as a deposit – so long as you have been contributing for a minimum period of three years and the purchase is intended to be your principle place of residence (for at least 6 months).If you have owned a home you may still be able to make a withdrawal. But ultimately it is up to Housing New Zealand to determine if you are in the same financial situation as a first home buyer.Effective 1 April 2015 you can withdraw your KiwiSaver savings and they include:

  • Your contributions
  • Your employers’ contributions
  • Any returns on investments
  • Any member tax credits

You must leave a minimum balance of $1,000 in the fund.It’s as simple as that for drawing out your savings for a first home.There is a bit more to the KiwiSaver HomeStart grant which quite often confuses people and here is how it works.It’s a one-off free grant from the Government to help you buy your first home.If you have been contributing to KiwiSaver for a minimum of three years, you might be entitled to one of the two HomeStart grants which are for:

  • Purchasing an existing home – the grant is between $3,000 and $5,000 based on $1,000 for each year of KiwiSaver membership.
  • Purchasing or building a new home or land to build a new home on – As the Government wants to encourage building they effectively double the incentive so it’s $2,000 each year of KiwiSaver membership up to $10,000 for each member.
    • 3 years of contributing you can get up to $6,000
    • 4 years of contributing you can get up to $8,000
    • 5 years of contributing you can get up to $10,000

It is possible to combine these benefits with someone else, for example a couple or two friends could pool their KiwiSaver funds together to purchase an existing property or build a new one.  However the maximum value of the grants payable for single dwellings is $10,000 for an existing property and $20,000 for a new property. These funds can be paid out prior to settlement to help with the deposit or paid at settlement time.

So what are the conditions?  You need:

  • to have been contributing to KiwiSaver the required miniumum amount for at least three years and be over 18 years of age
  • to have a 10% deposit towards the purchase price of the home (which can include the grants)
  • to live in the house for at least 6 months from settlement/completion of the property
  • to purchase or build your first home
  • have an income of $85,000 or less (before tax) in the last 12 months or if a combined income it must be $130,000 or less (before tax) in the last 12 months for two people buying together

There are price caps for different areas in New Zealand.  For example Hamilton, Tauranga, Western Bay of Plenty, Christchurch, Queenstown it is $500,000 for an existing property and $550,000 for new property while in Auckland it is $600,000 for an existing property and $650,000 for a new property.

Case study:

Sharon is a qualifying First Home Buyer who earns $70,000.

She has saved $40,000 in KiwiSaver, but also has money in the bank from an inheritance. She has been in KiwiSaver for over 5 years.

  • Purchase Price $600,00010%
  • Deposit required $60,000
  • Kiwisaver savings $40,000
  • HomeStart Grant $10,000
  • Citizen FHB Subsidy $10,000
  • Deposit $60,000
  • Current lending criteria amongst the major banks dictates a minimum 20% deposit *subject to change on the purchase price (which is $120,000) to qualify for a mortgage of $480,000 (note other lending criteria applies).
  • She already has $60,000 on deposit, and will use some of her inheritance money for the equity balance to settle.

If you need any assistance with KiwiSaver and/or have any questions feel free to send me a message and I can run you through it.  To apply just email your provider asking them to send you a letter confirming how much you could withdraw for a first home, it’s that easy.  Your solicitor will take care of the rest during the buying process.

*Correct as at 8.9.16

Kiwi Saver – What You Need To Know

Posted on by designerstrategy
Kiwisaver is a voluntary, work-based savings initiative with a range of membership benefits such as:
  • Member tax credits
  • Compulsory employer contributions
  • KiwiSaver HomeStart grant
  • Savings Withdrawal for first home

If you are buying your first home you can make a one-off withdrawal of some of your KiwiSaver savings to use as a deposit – so long as you have been contributing for a minimum period of three years and the purchase is intended to be your principle place of residence (for at least 6 months).If you have owned a home you may still be able to make a withdrawal. But ultimately it is up to Housing New Zealand to determine if you are in the same financial situation as a first home buyer.Effective 1 April 2015 you can withdraw your KiwiSaver savings and they include:

  • Your contributions
  • Your employers’ contributions
  • Any returns on investments
  • Any member tax credits

You must leave a minimum balance of $1,000 in the fund.It’s as simple as that for drawing out your savings for a first home.There is a bit more to the KiwiSaver HomeStart grant which quite often confuses people and here is how it works.It’s a one-off free grant from the Government to help you buy your first home.If you have been contributing to KiwiSaver for a minimum of three years, you might be entitled to one of the two HomeStart grants which are for:

  • Purchasing an existing home – the grant is between $3,000 and $5,000 based on $1,000 for each year of KiwiSaver membership.
  • Purchasing or building a new home or land to build a new home on – As the Government wants to encourage building they effectively double the incentive so it’s $2,000 each year of KiwiSaver membership up to $10,000 for each member.
    • 3 years of contributing you can get up to $6,000
    • 4 years of contributing you can get up to $8,000
    • 5 years of contributing you can get up to $10,000

It is possible to combine these benefits with someone else, for example a couple or two friends could pool their KiwiSaver funds together to purchase an existing property or build a new one.  However the maximum value of the grants payable for single dwellings is $10,000 for an existing property and $20,000 for a new property. These funds can be paid out prior to settlement to help with the deposit or paid at settlement time.

So what are the conditions?  You need:

  • to have been contributing to KiwiSaver the required miniumum amount for at least three years and be over 18 years of age
  • to have a 10% deposit towards the purchase price of the home (which can include the grants)
  • to live in the house for at least 6 months from settlement/completion of the property
  • to purchase or build your first home
  • have an income of $85,000 or less (before tax) in the last 12 months or if a combined income it must be $130,000 or less (before tax) in the last 12 months for two people buying together

There are price caps for different areas in New Zealand.  For example Hamilton, Tauranga, Western Bay of Plenty, Christchurch, Queenstown it is $500,000 for an existing property and $550,000 for new property while in Auckland it is $600,000 for an existing property and $650,000 for a new property.

Case study:

Sharon is a qualifying First Home Buyer who earns $70,000.

She has saved $40,000 in KiwiSaver, but also has money in the bank from an inheritance. She has been in KiwiSaver for over 5 years.

  • Purchase Price $600,00010%
  • Deposit required $60,000
  • Kiwisaver savings $40,000
  • HomeStart Grant $10,000
  • Citizen FHB Subsidy $10,000
  • Deposit $60,000
  • Current lending criteria amongst the major banks dictates a minimum 20% deposit *subject to change on the purchase price (which is $120,000) to qualify for a mortgage of $480,000 (note other lending criteria applies).
  • She already has $60,000 on deposit, and will use some of her inheritance money for the equity balance to settle.

If you need any assistance with KiwiSaver and/or have any questions feel free to send me a message and I can run you through it.  To apply just email your provider asking them to send you a letter confirming how much you could withdraw for a first home, it’s that easy.  Your solicitor will take care of the rest during the buying process.

*Correct as at 8.9.16

Your Biggest Asset – Not Your House Nor Your Car

Posted on by designerstrategy

Remember the last time you bought a car?

You called the insurance company straight away, right? And didn’t dare drive it without it first been insured.

Likewise, it would be crazy to buy a house and not bother insuring it. But consider the facts:

  • 8 out of 10 households have someone with vehicle insurance
  • A staggering 76% of New Zealanders between the age of 18-64 have no income protection
  • 47% of employed 18-64 year olds couldn’t maintain their standard of living after leaving their job for 4 weeks

1 in 5 New Zealanders think wrongly that ACC covers long term sickness that prevents employment.

When it comes to insurance, New Zealanders place much greater emphasis on their cars and homes than their lives and future income.  The Financial Services Council produced a report showing that while more than 95% of cars and homes are insured, only 57% of New Zealanders have life insurance. Less than 20% have income protection insurance.

This same report says 60% of people surveyed about insurances found the area of personal risk insurance ‘too hard’ so just never got around to it.  The insurance industry can share some of the blame for this by not making it easier to understand the process, products and how to get value for money.

Imagine if you had a machine in your back yard that printed $60,000 every year (or whatever your annual income is) until you turned 65 and would continue to do so unless it broke down.  Wouldn’t you want to insure that machine?  You can see where this is going. Most people don’t realise they are that machine.

It’s not your car or your house that is your biggest asset. It’s your ability to earn an income over a life-time that actually pays for all of that stuff and more.  For example take an income of $60,000 over 40 years and its $2.4 million

My personal income protection policy costs me 0.7% of my personal taxable income. If anything happens to me, it means my family and I will receive money every month (inflation adjusted) until age 65 or I’m medically able to go back to work.  If I chose a policy that only paid me out for two years it would halve the cost to about 0.35% of my income but still provide me and my family with a much greater level of security and peace of mind.

That security is important for me because I work really hard every day for what I have.  It’s worth paying that 0.7% to make sure I get to keep what I have worked so hard for and protect against any future loss of income so I don’t have to sell any assets or go backwards should something unforeseen happen.

Insurance is something the majority of us don’t like having but know it’s something we should have.  It’s like one of those chores you make excuses for not doing every week and never get around to. Market research also shows people feel this way but don’t know how much they need and don’t feel confident purchasing it because they don’t know where to obtain objective advice.

So don’t leave it in the too hard basket for when it’s too late.

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