Letters piling up are well worth opening, examining

The end of another financial year has passed and providers of KiwiSaver schemes will be busy preparing tax and annual member statements (AMS).

Look out in your email or mailbox over coming weeks, as these statements contain important information and are worth taking a little bit of time to work through and reflect on.

Let’s start with your AMS. For many KiwiSaver members, your account will be about saving for retirement, so conveniently your AMS will include information about what you are on track to potentially receive as a lump sum and what this lump sum could potentially convert to as a weekly income until you reach age 90.

This is provided if you have been with your current provider for at least a full year as at March 31 and you are aged between 18 and 64.5.

These figures are estimated and rounded projections rather than a guarantee and are based on your investment choice, the contributions that you have made and your KiwiSaver balance as at March 31.

As with all projections, certain assumptions are made, which in this case are determined by legislation. This ensures projections are calculated in a standardised way by all KiwiSaver providers.

You can find out more on the Financial Markets Authority’s (FMA) website. Your KiwiSaver provider will include a link to this on your AMS.

The projections are adjusted for inflation at 2%, which means that you can see the projected future value in today’s money. They do not take into account New Zealand superannuation or any other savings and investments you might have.

If you joined KiwiSaver in the past year, or are one of the thousands of people who transferred KiwiSaver providers during the financial year, your provider won’t have enough information to complete your projections this year, but this information should be included in next year’s AMS.

So what do you do with this information? Grab a pen and paper and think about what you want to do in retirement and what the cost of your plans might be. How do the figures compare?

Don’t have quite enough saved for all you want to achieve in the third age? You won’t be alone, but the key is to take action. Think about your contribution rate and the type of fund that you are invested in. You may also want to consider how long you contribute for. Reaching the age of 65 does not necessarily mean an automatic exit from the workforce!

You can take charge of your money. Sorted NZ has a great calculator that enables you to try different scenarios and easily assess the impact on your projected savings. Five minutes is time well spent getting sorted.

If you are over 65, your KiwiSaver provider may still include a weekly income figure, based on the FMA’s assumptions. Other than your projection, your AMS will also detail contributions you’ve made, any withdrawals during the year and tax paid or received.

You’ll also find how much you’ve paid in fees expressed as a dollar amount and what your investment returns are. This is useful information when reflecting on your KiwiSaver provider, but remember to always look at performance after fees and factor in what level of risk you are taking, rather than focusing on returns in isolation.

Your tax statement will include information about the taxable income, and taxes paid on your behalf this year. It is important to consider that if your KiwiSaver scheme is a PIE fund, which many are, PIE tax is no longer a final tax (meaning you were not entitled to any refunds if you overpaid). Seeking tax advice can help you understand the impact of PIE tax relative to your prescribed investor rate (PIR).

While it is easy to let the mail pile up on the kitchen table or overload the inbox, do take some time to review your annual member and tax statements for your KiwiSaver account, because it’s real money and it’s your money.

- Trish Oakley is head of Summer (Forsyth Barr’s KiwiSaver scheme). This is not a recommendation to buy or sell any financial product and does not take your personal circumstances into account.

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