Can the government take my KiwiSaver money? - Ask Susan

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I'm retired now so it doesn't really affect me anymore but it does my husband who is younger and self-employed and paying into KiwiSaver. If this country was to get into real financial difficulties for whatever reason can the government of the day take any part of your KiwiSaver?

No. The government cannot tap into your KiwiSaver funds, in the same way that it can't tap into your bank account and take your money.

What we've seen in recent times is the government changing the settings of the scheme - contribution rates and things like that. I know the industry worries that sometimes lots of small changes can shake confidence in the scheme, because people start to wonder what else it might be possible for the government to do. But members can be comfortable that the money they have invested is theirs.

If the country gets into financial difficulty, the primary impact on KiwiSaver could be that the government might decide it will means-test NZ Super, which could mean that people with more money in KiwiSaver receive a lower pension. That's a separate issue, though.

Do I keep my life insurance? I have been paying for 20 years and have longevity in the family … it's just over $120 per month. We are going down to just the pension but I have $80,000 invested for funeral and unexpected occasions or needs.

Life insurance does tend to get more expensive as we get closer to potentially being able to claim on it. The extent to which this happens depends on the structure of your insurance policy - those with level premiums generally increase with inflation while rate-for-age policies increase in price more sharply as you get older and are seen as more risky,

This isn't personalised advice, but in general I would approach this by thinking about what you're hoping to have the insurance for. If you've got debt you need to clear so that your partner isn't stuck with it, or something like that, life insurance can be really important. But if you're just hoping to leave something to family, you could possibly think about investing the money you would spend on the premium instead. I would recommend talking to an adviser about your options because there are lots of variables that will go into this decision.

Could you please clarify what is the best time of year to retire for tax purposes. I hear so many different arguments. I am 72, working part-time but wanting to fully retire.

I had never considered this, so I asked Robyn Walker, a tax expert at Deloitte.

She said, from a tax perspective, it comes down to the timing of when your income is earned.

"But from a tax perspective, ultimately it comes down to the timing of when income is earned. We tax income over a April 1 to March 31 period, so if you're expecting to get a large, lump sum at retirement - for example if you'd built up a large pile of annual leave which will need to be paid out, or there is some other taxable benefit on retirement - then that will count as an amount of income you have earned.

"If you were working most of the tax year then receiving that lump sum on top of your normal salary and wages could result in you being bumped up into a higher marginal tax rate. If, alternatively, you retired part way through the year, then what you do receive might be taxed at a lower rate as smaller amount of income might be received over the course of the year."

This is because we have progressive tax rates, which apply a higher rate of tax as annual income moves through the bands.

Walker says for someone who earns $10,000 a month, if they work a full year and earn $120,000 they will pay $29,477 in tax, which is an effective tax rate of 24.5 percent.

If they work half the year and only earn $60,000 in total, not taking into account other sources of income, then they will pay $10,220.50 in tax, which is an effective tax rate of 17.03 percent.

Tax will still be withheld as if they were going to earn $120,000 but the rest would eventually be refunded.

As someone who has spent a lot of time reading about KiwiSaver and investing, it seems to me that once a person has chosen an appropriate risk profile, one of the biggest levers they can pull is reducing unnecessary fees. Yet I rarely see the impact of fees discussed in a way that resonates with everyday New Zealanders. Most people hear "1 percent" and assume it's insignificant. What many don't realise is that over a working lifetime, that difference can compound into tens or even hundreds of thousands of dollars. I've looked for simple New Zealand examples and calculators that clearly demonstrate this impact, but they seem surprisingly difficult to find. Even many of the books and resources aimed at Kiwi investors touch on fees without really modelling what they mean in dollar terms over 30 or 40 years. That made me wonder: why do you think the topic doesn't receive more attention in mainstream financial media? Is it simply a matter of limited time and competing priorities, with issues like risk profile and contribution rates being seen as more important? Or is there another reason that the long-term cost of fees isn't discussed more prominently? It feels to me that New Zealand could benefit from a strong, trusted voice explaining the lifetime impact of fees in a simple and relatable way. I'm interested in your perspective, particularly given your experience covering KiwiSaver and personal finance.

It seems that we go in cycles - sometimes we're all talking about fees all the time, and then we're not.

I think there is still a decent amount of focus on fees, and we've seen a strong push from low-fee passive investment providers like Simplicity and Kernel in recent years.

I agree with you that fees are an important part of the KiwiSaver picture, and people should consider their impact.

We should also be thinking about what we get for our fees, and whether we think fund managers are delivering value for money.This is particularly true if we're moving towards compulsion.

Most people would probably think it's fine for providers to be charging a higher fee if they were routinely delivering a higher after-fee return. But we need to make sure that is the case.

That's why I think it's important that when people are comparing fund returns, they should try to do so among funds of a similar type, and net of fees.

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