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Kiwi Saver
Introduction
The implementation of Kiwisaver was 1 July 2007. From that date parishes, as employers have to register with Inland Revenue for Kiwisaver, any new employee (including ministers transferring between parishes) must be registered as a member of a Kiwisaver scheme, and any existing employee has the option of joining a Kiwisaver scheme.
You should have received an IRD employer pack detailing how the scheme works and your responsibilities. You may also have received material from potential providers. I have summarized below the key points pertaining to the Church and would like to refer you to an earlier document that was attached to the April newsletter. If you require a copy, please let me know.
Provider options
We have been in contact with 2 potential providers of Kiwisaver, Aonsaver and the Koinonia Fund. This is to give you some information on the costs and service levels provided by these organizations, however it is important to note that I am not recommending them to you as employers and you should not recommend them to your employees.
Parishes may or may not have a preferred provider, but cannot attempt to recommend, influence or persuade an employee to use that provider. You can pass on the information summarized below, but if an employee wishes to choose one of these options, they should read the provider’s investment statement first. This is because Kiwisaver schemes are not government guaranteed and in the event of a scheme failing, or not performing as well as other schemes, a member should not argue that they were given poor advice by their employer.
Aonsaver
- Relationship with PCANZ: Aonsaver is administered by AON, who have been the provider of the PCANZ Beneficiary Fund since July 2004.
- Service/support: They have a person dedicated to PCANZ Beneficiary Fund and have provided a high level of service to ministers and parishes in the past. They have stated that level of service would continue for Kiwisaver members.
- Government default provided: No.
- Kiwisaver scheme available to parishioners: Yes
- Choice of investment strategies: Yes
- Ethical provider policy: Yes
- Administration fees: Fees are not yet known but are likely to be higher than other providers because of the personalized service and support offered. The estimate for year one is $50.
- Technology: Electronic employer registration and employee registration.
- Prospectus and Investment statement: On request or available on their website:
Koinonia Fund
- Relationship with PCANZ: Koinonia Fund is administered by the Anglican Church and limited to Christian based organizations and individuals.
- Service/support: They have a hotline facility so parishes can talk to administrators. They do not have a person dedicated to PCANZ.
- Government default provided: No.
- Kiwisaver scheme available to parishioners: No
- Choice of investment strategies: Yes
- Ethical provider policy: Yes
- Administration fees: Fees are not yet known but this is a non-profit organization that is not commercially driven. As such fees are likely to be lower than other providers.
- Technology: Electronic employer registration and employee registration.
- Prospectus and Investment statement: On request or available on their website:
Although these providers offer potential advantages to employees, parishes are free to register them, or any other provider as their preferred provider.
The first choice of a provider will always rest with the employee. It is their choice whether to join Kiwisaver and what provider they wish to use. They also have the option of changing their provider should they wish.
If they wish to join but do not make a choice and the employer has a preferred provider, that provider will be assigned to the employee. If the employee doesn’t choose, and the employer doesn’t have a preferred provider, a default provider will be assigned by Inland Revenue. There are six default providers:
- ASB Group Investments Limited
- AMP Services (NZ) Limited
- ING (NZ) Limited
- Mercer Human Resources Consulting Limited
- AXA New Zealand Limited
- Tower Employee Benefits Limited
Although you as employers don’t have to nominate a provider, employees should be advised to investigate options, as service levels, costs and investment performance will vary between providers. Default providers, for example may only offer conservative investment strategies, and may not have ethical investment policies.
Employer Subsidies
The government announced in the 2006 budget that employer contributions would commence from 1 April 2008. The initial rate will be 1 percent of employees salary, rising by 1 percent per year to 4 percent in 2002/13.
The government will reimburse employers by way of credits to PAYE payments from April 2008, up to a maximum of $1,040 per annum ($20 per week). This will cover additional staff costs for the first two years but after that, there will be a cost to the parish. For example, using a base salary of $40,000 pa:
| 6,880.00 | 4,400.00 | 3,320.00 | 1,080.00 | ||
| Salary | Employee Contribution (4%) | Employer Contribution | Govt Tax Credit for Employer | Cost to Employer | |
| 2008 | 40,000.00 | 1,600.00 | 400.00 | 400.00 | - |
| 2009 | 42,000.00 | 1,680.00 | 840.00 | 840.00 | - |
| 2010 | 44,000.00 | 1,760.00 | 1,320.00 | 1,040.00 | 280.00 |
| 2011 | 46,000.00 | 1,840.00 | 1,840.00 | 1,040.00 | 800.00 |
Minister's Contributions
Parishes are deemed by IRD as the employer because they administer the payroll, and ministers, like anyone else can join a Kiwisaver scheme. However please note that I am receiving conflicting advice about minister’s status as employees and whether a stipend is the equivalent of a salary The issue will be resolved by then but the uncertainty should be explained to ministers who wish to join a scheme prior to 1 April with the expectation of employer contributions commencing on that date.
This employment status uncertainty only applies to ordained ministers. Other Lay ministers, non-ordained pastors and other employees will be entitled to the employer subsidy from April 2008.
Note that for ministers, the contribution rate of either 4% or 8% will be based on the basic stipend, the New Seniority Allowance. This is because seniority allowance, like the stipend is subject to PAYE.
Employee Exemption from Kiwisaver
There is a facility in place in which employers can apply to Inland Revenue for exempt status from Kiwisaver. One basis for exemption is the provision of an existing pension scheme. Please note that although Kiwisaver would be in addition to the Beneficiary Fund, parishes cannot apply for exemption on that basis because:
- In order to be considered for exemption, an employer must provide a pension scheme for all employees. Existing lay employees are not eligible for the Beneficiary Fund
- The Beneficiary Fund differs from Kiwisaver in that it is a Defined Benefit Scheme (the amount payable to ministers on retirement is defined, whereas Kiwisaver is a Defined Contribution Scheme (the amount payable depends on the amount that has been contributed)
New or Transferring Employees
As stated, new or transferring employees (and ministers) must be automatically enrolled in a Kiwisaver scheme from 1 July. If they do not wish to join, deductions must still be made from their salary/stipend and paid to IRD. An application for withdrawal is made to IRD but that may take up to 8 weeks to be processed, at which point employee and employer contributions will be refunded. The potential cash flow impact on the employee should be explained at commencement of employment.