Ever felt like you're being taxed twice on your pension? It's a question that's left many scratching their heads, including our listener Susan. But here's where it gets controversial: Is it fair to pay tax on money that already came from your taxed income? Let’s dive in and unravel this financial puzzle.
Why Do We Pay Tax on Pensions?
Susan’s question touches on a common misconception. Many believe their pension comes from a dedicated pool of money they’ve paid into over their working lives. And this is the part most people miss: Pensions aren’t funded by a personal savings pot; they’re part of the general government expenditure, paid by current taxpayers. So, when you receive your pension, it’s treated like any other income in New Zealand—subject to tax.
Here’s the kicker: Even though the money comes from the government, it’s taxed based on your individual circumstances. For instance, if you’re working while claiming NZ Super, your overall income could push you into a higher tax bracket, meaning you pay more tax on your pension. Bold question: Should pensions be tax-free, especially for those who’ve already contributed so much? Let’s debate that in the comments!
KiwiSaver: Checking Your Balance and Boosting Contributions
Switching gears, let’s talk KiwiSaver. Wondering how much you’ve saved? Most providers offer an online platform to check your balance, or you can give them a call. If you’re unsure who your provider is, Inland Revenue has the answer. Want to increase your contributions? You can do this through IRD’s myIR system, by contacting your provider, or by notifying your employer. Pro tip: While employers typically match the default contribution rate (3%, rising to 4% by 2028), some are willing to match higher amounts. Worth asking!
Pension and Additional Income: What’s the Limit?
Here’s a scenario: What if a family member gifts you $1,000 per week? Will it affect your pension? The short answer: No ceiling on income for KiwiSaver, but it could impact other benefits like the accommodation supplement. Controversial thought: Should there be a cap on additional income for pensioners? Share your thoughts below!
Retiring Abroad: What Happens to Your Pension?
Planning to retire on a yacht or in a country without reciprocal agreements? If you’re overseas for more than six months, you’ll need to apply to MSD at least six weeks before leaving to keep your pension. Countries like Australia have reciprocal agreements, making it easier to access NZ Super. But for non-reciprocal countries, your pension amount depends on how long you’ve lived in New Zealand between ages 20 and 65. Final question: Is the current system fair for retirees living abroad? Let’s hear your take!
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