Your KiwiSaver investment should be reviewed on an annual basis and June is the best time to do this for a number of reasons. The Government tax credit of around $521 is paid into your KiwiSaver account every July, and the amount you receive will be based on your contributions for the year ended 30 June. To receive the full amount of tax credit, you will need to have contributed around $1,042 between 1 July, 2013 and 30 June, 2014. You can make a direct contribution into your KiwiSaver account to top it up if required.
June is also the time to make sure that the tax rate for your KiwiSaver is correct. By now, you should know what your taxable income was for the last two years, and this will determine your PIR (Prescribed Investor Rate). The tax you pay on KiwiSaver is a final tax and if your tax rate is set too high, you will not be able to get a refund, so it is important to make sure the tax rate is correct.
Every year you should review whether your chosen investment option is still appropriate. The difference between options such as Conservative, Balanced and Growth is the weighting given toward income assets (cash and fixed interest) and growth assets (property and shares). A recent survey of KiwiSaver funds by Mercer shows that over the last 5 years, the average rate of return for Conservative funds is 7.79% per annum, compared with 10.22% for Balanced funds and 12.27% for Growth funds. While Growth funds offer the highest rate of return over the long term, they are more volatile, which means that from year to year the return can vary widely and may even be negative. Choose an option that matches your attitudes towards risk and return.
