I have been contributing to KiwiSaver from its beginning in 2007 and have kept 4 per cent contributions going from my salary each week.
My employer has fallen on hard times, she tells me, and is now holding on to my contributions as well as her employer contributions, not to mention unpaid tax since August of last year. Numerous letters, requests, emails have not improved the situation.
The tax department assures me they are pursuing her and trying to resolve the situation. However, I am the one missing out. Government contributions to my KiwiSaver account for the last year are half what I am due and I am missing out on growth of my investment because my contributions have not been forwarded.
I do not agree with the employer holding on to my contributions. I should be in control of depositing into my KiwiSaver account myself, and then at least I would be owed only her contributions.
Mary Holm: I can understand why you would rather make your own
KiwiSaver contributions directly.
But I suspect most employees prefer to have their contributions taken out of their pay. And giving employees a choice would probably create an administrative nightmare.
So, assuming we're stuck with the system we have, what can be done for you and others in similar situations?
Firstly, let's look at how the system is supposed to work. "The employer has a legislative responsibility to make employee deductions from a member's salary or wages, and to make compulsory employer contributions at 2 per cent of their gross salary or wage," says Inland Revenue.
"Both employee and employer contributions must be accounted for on the employer's monthly schedule (EMS) and paid with their PAYE."
Broadly, there are two points at which this system can break down:
* The employer files an EMS but doesn't hand over the KiwiSaver money. In this situation, Inland Revenue pays your employee contributions to your provider anyway. That's because the Government guarantees that if KiwiSaver money is taken out of your pay, it will make it into your account. Inland Revenue then recovers the money from the employer - or at least tries to.
The Government also pays interest on your contributions, calculated from the 15th of the month in which the deductions were made - although currently the interest rate is only 1.59 per cent.
You may lose a little on this deal - if the 15th is later than when most deductions were actually made, and if the interest is less than you would have made in KiwiSaver. But sometimes you'll gain - especially when KiwiSaver returns are sagging. Either way, it will probably make little difference to your total long-term savings.
And you won't miss out on tax credit money. "When the delayed deductions are passed to your provider, IR will calculate whether you are entitled to any extra member tax credit as well and pay this at the same time," says the department.
So far so good. However, contributions from your employer are not government-guaranteed. While Inland Revenue will go after an employer, you won't get that money in your KiwiSaver account until they've received it.
Adds the department: "When or if the employer contributions are received, the member will receive interest on these from the first day of the month in which they are received by Inland Revenue." But you don't get interest on the period before the employer pays Inland Revenue. And if the money is never paid - which might happen, for example, if the employer goes into receivership - you miss out.
You'll still gain from being in KiwiSaver, because of the kick-start and tax credits. But it's not as good as it should be. That's life.
* The employer doesn't even file their EMS - which sounds like what has happened to you.
"Without an EMS we are unable to ascertain the amount of employee contributions deducted from an employee's wages, so are unable to pass these on to the provider," says Inland Revenue.
But it doesn't end there. Employers who don't meet their EMS obligations "are charged penalties and are followed up by Inland Revenue teams set up to specifically police KiwiSaver".
And once the EMS comes in, "employees will be credited with their contributions, plus interest, and with member tax credits from the date the deduction was first made".
In this situation, it might help if you show the department payslips listing your KiwiSaver deductions or any similar documents. Everyone should keep those.
In your particular case, you have given permission for me to pass your details on to Inland Revenue and they are making sure you get what is due to you.
Do let me know the outcome.
Others in a similar situation should ring Inland Revenue at 0800 549 472. While it might feel difficult to turn in your boss, it's your right to take part in KiwiSaver. And it doesn't say much for your employer if they won't contribute 2 per cent of your pay towards your financial wellbeing.
It would be understandable, though, if you don't do this until you have another job lined up or started. Inland Revenue will still chase up your former employer to make sure your KiwiSaver account is credited with at least your and the government's contributions, plus interest.
Mary Holm is the author of bestselling books on KiwiSaver and
personal finance. She is also a highly praised seminar presenter. Her
written advice is of a general nature, and she is not responsible for
any loss that any reader may suffer from following that advice.
Mary Holm: Kiwi Saver: How to Make it Work for You
Gareth Morgan: Kiwisafer: How to Keep Your Money Safe in Kiwisaver
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