KiwiSaver continues to grow

Since KiwiSaver started ten years ago, KiwiSaver members have built up total assets of more than $40 billion dollars and 2.7 million New Zealanders have joined the scheme, according to the FMA’s annual KiwiSaver report 2017.

Based on returns as at 31 March 2017, total assets were up $7 billion from $33.8 billion in 2016. Investment returns of $2.7 billion were more than double those of 2016.

For the second year running, the number of transfers (between providers) is higher than new members joining the scheme.

The FMA’s findings raise alert for the number of default KiwiSaver providers who are not meeting their responsibilities in terms of addressing the financial literacy of members. The FMA has written to the chief executive of each default provider to address this.

From March 2018, KiwiSaver providers will need to show the dollar amount of fees paid on a member’s annual statement. The change comes to help members better understand their fees.

KiwiSaver provider backs compulsory super

New Zealand’s biggest KiwiSaver provider ANZ is backing compulsory super after new research finds that just 53 per cent of New Zealanders who earn less than $50,000 are members of KiwiSaver.

Although the research found that 80 per cent of those surveyed who earned more than $100,000 were KiwiSaver members, many were not regularly contributing to the scheme.

Since KiwiSaver was launched 10 years ago, 2.7 million people had joined, however, 375,000 working-age people have not enrolled in the scheme.

ANZ is proposing that KiwiSaver is made compulsory. If it is not made compulsory, ANZ is suggesting all adult non-members should be automatically enrolled with an option to opt out or a reintroduction of Government incentives to join up.

ANZ said the findings do raise questions about whether KiwiSaver is reaching the people who need it the most. Only 35 per cent of those surveyed said they have calculated how much they will have saved by age 65. A further 37 per cent said there was too much uncertainty and 22 per cent said it was too hard to work it out.

Calculating Employer Superannuation Contribution Tax (ESCT)

Employers are required to pay Employer Superannuation Contribution Tax (ESCT) on the superannuation contributions made to their employees’ superannuation.

ESCT is tax deducted from the employer cash contributions paid into their employee’s KiwiSaver or superannuation accounts and paid to Inland Revenue.

Contributions include any cash contribution to a super fund paid by the employer for the employee’s benefit. If an employee requests deductions from their wages to be paid into a super scheme, these are not considered employer contributions.

There are three steps for paying ESCT.

1. Calculate each employee’s ESCT rate for the year

Employers need to work out the ESCT rates for all employees at the beginning of each tax year. Rates differ between each person depending on how long they have worked for you and their salary.

Employees that worked for you for the entire previous tax year will need their ESCT rate based on the total salary or wage received plus the gross employer contributions you made in the previous year.

The ESCT rates are as follows:

2. Calculate ESCT every pay period

Once you have determined the ESCT rate for each staff member you can then make the deduction from the employee’s gross employer contribution every payday and add up the total ESCT for all of your staff (which is recorded on the IR 345). On your IR 348 be sure to include your net employer superannuation contribution and the total ESCT. Record the ESCT in your wage book or payroll software and on the IR 348 and IR 345 forms.

3. Pay ESCT to Inland Revenue

Pay ESCT to Inland Revenue on the same due date as your PAYE and other deductions.