NZ Super & KiwiSaver: Questions on Fairness & First Home Use
New Zealand’s universal pension scheme, NZ Superannuation, is facing renewed scrutiny over its fairness, with questions raised about payments continuing to individuals with substantial incomes. A new podcast launched by RNZ, ‘No Stupid Questions’, hosted by Susan Edmunds, is providing a platform for public debate on the issue.
The debate centers on the fact that over 9,000 New Zealanders aged 65 and over currently earn more than $200,000 annually yet remain eligible for NZ Super, commonly known as the pension. While these recipients are subject to income tax on the benefit, some argue that the system’s universality is inequitable. The Retirement Commissioner has acknowledged the validity of questioning the system’s fairness, according to reporting from .
One correspondent to RNZ highlighted the perceived unfairness, stating they ceased working due to ill health but would have continued for another decade if able, and wouldn’t have anticipated receiving the pension under those circumstances. Others continue to work while receiving the pension, potentially to bolster savings, making a reduction in entitlement less appealing.
Sir Ian Taylor is promoting Share My Super, an organization that allows pensioners to donate their benefits to charity if they do not require the funds, offering a voluntary avenue for those who feel uncomfortable receiving payments while financially secure.
KiwiSaver Funds and Overseas Property Purchases
Alongside the pension debate, questions have also surfaced regarding the use of KiwiSaver funds for property purchases outside of New Zealand. The rules governing access to these funds become complex, particularly for those considering relocating to Australia.
Generally, individuals who have resided outside of New Zealand for over a year can withdraw their KiwiSaver funds – excluding government contributions – by declaring permanent emigration. These funds can then be used for any purpose, including purchasing a home in their new country of residence. However, the situation is more nuanced for those moving to Australia.
Unlike other destinations, moving to Australia doesn’t allow for direct withdrawal of KiwiSaver funds for a home purchase. Instead, funds can only be transferred to an Australian superannuation savings account. While Australia has a “first home super saver scheme” allowing withdrawals for home purchases, it’s subject to limitations. Currently, individuals can only utilize up to $15,000 of their KiwiSaver funds through this scheme, and not all Australian superannuation schemes offer the option.
For those remaining in New Zealand, KiwiSaver funds are restricted to domestic property purchases; the funds cannot be used to buy a home elsewhere, as the intention is to support first-home ownership within the country.
Navigating KiwiSaver Withdrawals
The process of accessing KiwiSaver funds for a first home purchase requires engagement with both the individual’s KiwiSaver provider and Kāinga Ora – Homes and Communities. Individuals must have been in KiwiSaver for at least three years to be eligible for withdrawal.
Eligible funds for withdrawal include personal contributions, employer contributions, government contributions, and any earned interest or fee subsidies. However, a minimum balance of $1,000 must remain in the account. Funds transferred from Australian Complying Superannuation schemes are not eligible for withdrawal.
Individuals can utilize the myIR platform to obtain proof of income and KiwiSaver deductions to support their application through Kāinga Ora.
A Broader Conversation on Financial Equity
The questions raised by RNZ listeners and the ongoing debate surrounding NZ Superannuation and KiwiSaver highlight a growing public interest in the fairness and sustainability of New Zealand’s social security and savings schemes. The launch of ‘No Stupid Questions’ provides a valuable forum for these discussions, and the willingness of figures like Sir Ian Taylor to promote alternative solutions like Share My Super suggests a desire for greater flexibility and individual responsibility within the system.
The complexities surrounding KiwiSaver withdrawals for overseas property purchases underscore the need for clear guidance and accessible information for New Zealanders considering relocating. The limitations imposed on withdrawals for Australian property purchases, in particular, may prompt individuals to carefully consider their financial options before making a move.
RNZ is encouraging further public engagement through its podcast and a new money newsletter, ‘Money with Susan Edmunds’, signaling a commitment to providing ongoing coverage and analysis of these critical financial issues.