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​A Closer Look at the Superannuation Scheme in New Zealand

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Most people are anxious about what’s going to happen in the future. Even if you already have a stable job or a growing business, there is always the possibility of a great financial crisis that could make you lose your job or push you into bankruptcy. In New Zealand, everyone who is 65 years of age or older can apply to receive pension through the superannuation scheme. What is this scheme all about and how is it different from other retirement plans around the world?

Basic Qualifications

As a general rule, only people who are 65 years of age or older are eligible to avail of the fund. You should also have stayed in New Zealand for at least 10 years after you have reached the age of 20. In addition, 5 out of the 10 years mentioned should be during the period that you were already over 50 years of age.

If you do not meet the requirements mentioned above, the government has also created a set of eligibility rules which include the following:

-if you are working as a missionary,

-having special medical or surgical treatment,

-if you are doing vocational training,

-if you are working on a New Zealand owned or registered ship trading to and from here,

-if you are serving in one of the Commonwealth's armed forces,

-if you are working overseas and paid tax in New Zealand on the earnings from that work, or

-if you are working with Volunteer Service Abroad

If you are over 65 years of age and you are not sure if you are qualified, you can also get in touch with the government to confirm if you are eligible to receive pension.

How Much Will I Receive?

Pensions are paid twice a month and the amount you will receive depends on your previous employment background, your civil status and if you are living alone or under the care of your family. If you are married, the amount of pension you will receive will also depend on whether you and your spouse are both qualified to receive pension.

Can Personal Contributions Be Made?

At the moment, there is no option for individuals to contribute to the fund. The superannuation scheme is funded by the New Zealand government through the NZ Superannuation and Retirement Income Act 2001. Therefore, there is no need to set aside a portion of your income to put into the super fund so that you can apply for pension when you reach the age of 65.

Investment Options

The funds in the superannuation scheme is being invested by a group of investment managers who look at making the portfolio as diverse as possible, and their investment decisions are guided by their intention to reduce risk without compromising potential returns. They ensure that the portfolio consists of securities that are stable, but at the same time they also ensure that the returns are not stagnant. This is in lieu of the fact that they are foreseeing a steady growth of the number of people who will reach the retirement age in the years to come, and they want to ensure that they are able to grow the fund in order to compensate for the anticipated growth in the number of retirees.

At the moment, the public is not allowed to intervene or make investment decisions, which can also be considered a blessing since people are not burdened by the responsibility of making sound investment decisions in order to secure their future.

How can I Save for my Retirement?

While there are no available retirement plans in New Zealand at the moment, the superannuation scheme offers everyone a secure future during their retirement years. Even if there are no options at the moment to save for retirement and have the said amount deducted from one’s taxable income, such as the practice in other countries, the superannuation scheme offers benefits that are available to retirees at no cost at all. There is also no need to worry about investment options since competent and skilled investment managers are doing their best to ensure that the super funds will grow steadily and will be able to support every citizen that will be qualified for pension.

However, you have the option to open an investment account where you can keep your savings for your retirement. At the moment, there are no special considerations or rules governing retirement funds in New Zealand, so any amount you set aside for your retirement will not be tax deductible. In addition, any gains you make from investing in stocks or mutual funds could also be subject to any corresponding taxes that the government mandates.

For some people, saving for retirement is not an optional matter. If they do not save up enough funds for their retirement, they could end up penniless and with no means to support even their basic needs. Thanks to the superannuation scheme in New Zealand, everyone can be at peace knowing that when they retire, they will be eligible to receive pension and will be able to go on living their lives. They are assured that no matter what happens the government will be able to provide for their basic needs. They do not have to worry about their future because the government was one step ahead and through the establishment of the superannuation fund, they are able to secure the future of everyone who will reach their retirement age. 

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