Kiwisaver for my newborn son?

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Forums › Finance and wealth management › Kiwisaver for my newborn son?

Disrespective

1926 posts

Uber Geek

#133678 30-Oct-2013 15:27

As the title suggests i'm interested to hear what people think about an idea I had of signing my newborn son up to Kiwisaver now to brew up a nice lump sum for when he leaves home. I figure if I put $1k in each year at a conservative interest rate he could have ~$40k or so without too much trouble.

I don't know the exact ins and outs, nor have I spoken to anyone 'qualified' about it, yet but just throwing the idea around.

I can't see too many cons on doing this but the largest of which would be that I don't think he could use it for his education, only housing/retirement... true?

Thoughts?

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wellygary

8328 posts

Uber Geek

#924243 30-Oct-2013 15:45

We looked at the exact same thing for our kids, In the end we decided against it

1) you only get limited benefits for being in Kiwisaver (only the $1000 kick start) over any other sort of investment trust, (There is no government $500 contribution for those under 18)

2) They cannot get the money out until they are at "retirement age" which may change, (except for the house deposit scheme)
This could be seen as a plus or a minus, depending on your viewpoint

3) Politicians have proven themselves unable to resist meddling with such schemes ( changing the government contributions etc)

We are putting a couple of grand aside each year in a Balanced unit trust and when will look at the situation in 10 years, and if we decide to join them up will make a one off contribution, but the locking in till the pension age is a bit of a turn off

But do get them an IRD number and open any accounts in their name, they pay a much lower withholding tax rate as they essentially have no income...

mattwnz

20164 posts

Uber Geek

#924842 31-Oct-2013 15:26

hashbrown:
mattwnz: It is not as though they can withdraw that for a first home.

Wrong. By the time they are able to buy a first home, the investment returns will dwarf the original $1000 and you are able to withdraw investment returns.

You can only withdraw your own contributions plus returns (if any), less I believe the fees. If in a cash fund, the returns on $1000 less fees are likely to be tiny, unless yo go in a fuind that doesn't charge fees for people under 18. You can't withdraw any government contributions or the kickstart. I know because I tried to apply, and amount I could get wasn't really much more than I had contributed, even though I have been in it for 5 years. Not unless you qualify for a subsidy but that has some major restrictions. The other thing to note is that you can only withdraw it if you use a lawyer, and the lawyers tend to charge $250, just to apply for the kiwisaver withdrawal on your behalf, which is a large percentage. The only reason I bothered with the withdrawal, as my lawyer did it for free as part of the conveyancing, but every other lawyer I tried does charge.

I recall that someone has done some calculations on this somewhere, and whether they thought it was worth getting children signed up or not.