KiwiSaver is a great option for investing to help you reach your financial goals and diversify your investment portfolio. It's important that investors understand how KiwiSaver works so they can make informed decisions about their money and what will be suitable for their circumstances. This beginner's guide provides a great introduction to KiwiSaver for anyone who might be interested in joining KiwiSaver.
Find out how much your contributions will be and how much the employer and government will contribute. Contributions
Find out the when you will be able to withdraw from Kiwisaver scheme. KiwiSaver withdrawals
Find out how to check your kiwisaver balance online. Its simpler than you think. How to Check Kiwisaver balance
Find out what are the main risks associated with kiwisaver investment. Risk
Find out some of the main rewards associated with KiwiSaver Scheme. Rewards
KiwiSaver is a voluntary savings scheme set up by the government to help kiwis save for retirement. It launched in July 2007 and is administered by Inland Revenue.
The government wants most of us to be self-supporting in retirement, with only a few needing financial support from the state. Don’t confuse it with NZ Superannuation, which is what you get when you turn 65 – you can think of it as your own personal savings account where your money grows over time.
KiwiSaver is not compulsory, but if you do join, your employer and the government will both contribute to your KiwiSaver account.
How does KiwiSaver work?
KiwiSaver is funded by contributions from its members, the government, and employers.
When you join KiwiSaver, your money is put into a fund, which is managed by an independent trustee. Your money is invested in stocks, bonds and/or cash in line with the investment options you choose. This generally means that the value of your investment can go up or down.
When you first join KiwiSaver, you select how aggressive or conservative you want your investment to be. There are five types of funds:
- conservative funds
- balanced funds
- growth funds
- aggressive funds
- default funds
If you are an employee and you have met the KiwiSaver eligibility criteria (or if you’reeligible to join a complying superannuation fund), your employer must deduct 3% of your gross salary or wages and put them into your KiwiSaver account. The money deducted from your pay is known as compulsory employer contributions. If you want to increase this amount, you need to arrange this with your employer.
In addition to this 3%, your employer will also add an amount equivalent to 1% of your gross salary or wages, which they do not deduct from your pay. The government will match this amount dollar for dollar up to a maximum of $521 per year (after-tax).
How Can Your Join KiwiSaver?
If you meet the KiwiSaver eligibility criteria, then you can become a member of KiwiSaver by enrolling online or by filling out a form at one of their branches in person. The process is straightforward and should take just a few minutes of your time. Once enrolled, you need to complete the default investment option questionnaire and select your fund type (default, conservative or aggressive).
Joining KiwiSaver is easy. You can usually sign up for it through your employer or join as an individual by contacting KiwiSaver providers directly.
Just go to Work and Income or the Inland Revenue Department website and fill out the application form.
They’ll pass your details on to a KiwiSaver provider, and you’ll receive a membership pack from them in the mail within 10 working days. This will include information about the fund you’ve joined and how you can change it if you want to.
Your IRD number or an IRD number exemption notice from Inland Revenue (if you haven’t got one already)
Information about your current employment situation (if you’re employed)
Your bank account number and bank branch number if you want to make automatic payments from your bank account. You can also pay by automatic payment from your salary or wages. If you’re employed, your employer will arrange this for you through Payroll Giving.
Your birth certificate or passport as proof of your identity
Who Can join Kiwisaver
You do not need to be a New Zealand citizen, although, as some of your KiwiSaver benefits are paid for by the government, it may help if you intend to stay in New Zealand long-term.
KiwiSaver is available to anyone, whether they’re working or not. This includes:
People who are self-employed.
People who work part-time or full-time and are under the age of eligibility for New Zealand superannuation (currently 65).
People who don’t have a job but are looking for one.
Students aged 18 and over, including people doing tertiary studies such as university or polytechnic courses.
How much you can contribute
Savings Contributions: As a member, you can choose to make contributions of 3%, 4%, or 8% of your gross pay. You choose the rate and then stick with it unless you ask to change it in the future.
If you don’t choose a contribution rate, KiwiSaver will put you at 3%. If you’re not sure what to do, keep things simple and stick with this rate for now.
If you don’t have an employer, you can make voluntary contributions directly to your KiwiSaver provider instead.
- Voluntary Contributions: You can make extra lump sum payments into your KiwiSaver account at any time through internet banking or by writing a cheque and posting it to your KiwiSaver provider with a copy of their Voluntary Contribution form. However, it’s important to remember that if you’re already contributing 3%, 4%, or 8%, you will be taxed on any additional contributions which exceed this percentage of your gross income.
- Employer contributions :Your employer will also make contributions at the same time as your payment is processed. This is calculated based on your gross salary or wages. Employer contributions are generally 3% of your gross salary or wages (before tax) unless you are over 18 and earning more than $35,000 per year (gross). If this is the case, they will contribute 2%. This applies regardless of whether your contribution rate is 3%, 4%, or 8%.
- Government Contributions: KiwiSaver has some great government incentives to help boost your savings. These include: A $1,000 kick-start when you sign up if you’re eligible Annual Government contributions of 50 cents for every dollar you put in, up to a maximum of $521.43 per year (that’s $10 a week). This is called the Member Tax Credit (MTC). The Government contribution is paid each year into your KiwiSaver account after 30 June. The MTC is only available if you are a member of a KiwiSaver scheme or complying fund.
When Can I Withdraw Money from KiwiSaver
When you contribute to KiwiSaver, your money is locked up until the first eligibility date that occurs after you have been a member for three years. After this, you may only withdraw your savings if you are eligible under one of the four withdrawal categories.
1. Serious illness or injury (for medical treatment only): If you’re suffering from a serious illness or injury that requires significant treatment in New Zealand, you can withdraw your savings (including the Government contributions) and any returns earned on those contributions. You must supply documentation supporting your application and prove that the money will be used for treatment in New Zealand.
2. Permanent emigration: If you’re permanently emigrating overseas, you can withdraw all of your savings (except any Government contributions made on behalf of an employer). You must prove that your departure from New Zealand is permanent (for example, by supplying an IRD certificate).
3. Financial hardship due to significant and ongoing financial difficulties: If you’re experiencing severe financial hardship and cannot meet minimum living expenses because of unemployment or serious illness, a court order requiring payment for maintenance or debt costs relating to the purchase of a home, or other special circumstances like a natural disaster, etc. then you can withdraw from your KiwiSaver account.
4. Buying your first home: When you’re buying your first home, you may be able to withdraw all of the money in your KiwiSaver account (including member tax credits) as long as you have been contributing to a KiwiSaver scheme for at least three years.
Contributions to a first-home deposit can be made by both members and employers. If you’re making voluntary contributions in addition to those required from your employer, you may also be able to withdraw these. The three-year requirement applies to the date you became a member of a KiwiSaver scheme, not when you started contributing to it.
How do I check my KiwiSaver balance?
If you’re already a KiwiSaver member, you can check your KiwiSaver balance by contacting your provider. If you don’t know who your provider is or need to get in touch with them, use the FMA tool finder here.
You can also set up an online account with your provider if they have one. Most KiwiSaver providers will only let you move money between funds once every three months, so it’s worth setting up an online account so you can keep track of your investments without calling them every time you want to know how much money you have.
You can view all your KiwiSaver information, including your balance and contributions, by logging in to the My KiwiSaver section of this website.
Risks of Investing in Kiwisaver
KiwiSaver has some risks, and it’s important you understand what they are before you invest. The main risks to your KiwiSaver balance are:
Investment risk :
The value of your KiwiSaver account can go up and down, depending on the performance of the fund or funds you choose. There is no guarantee that your investments will achieve the returns that you expect.
Sometimes the market will go through periods where it seems to be going down most days. This can make you feel worried about how much your account has gone down by. The more conservative the fund type you are in, the less likely you are to notice this.
Liquidity risk :
Liquidity risk is the risk that you may need to get access to your money quickly and not be able to do so. This may occur because you need to meet an unexpected expense orface an emergency.
It may not be possible to withdraw all or part of your KiwiSaver money at any given time. Access to your money is dependent on the fund provider’s ability to sell investments (or potentially borrow against them). The amount you can access may also be affected by market volatility and liquidity restrictions placed on the fund by its investment managers.
Inflation risk :
Inflation is when prices go up over time (in other words, your dollar buys less).Your savings may not keep pace with inflation and, therefore, will have less purchasing power over time. This means that the cost of living when you retire may be more expensive than today.
Benefits of Investing in Kiwisaver
Annual member tax credits – the government contributes up to $521.43 per year, paid into your account every year if you put in at least $1,042 yourself.
Contributions from your employer – more than 90% of employers contribute to their employees’ KiwiSaver accounts, usually at a rate equivalent to 3% of your pay.
Generous returns – returns vary according to the type of fund you’re in, but over 10 years, the average return across all funds is 8%.
Savings withdrawal – members are able to withdraw their money at age 65 or earlier if they have permanently emigrated from New Zealand or are faced with the emergencies mentioned above.
Contribution holidays –You can take a contribution holiday once a year for up to 5 years after two years of being in a Kiwisaver scheme.
Top 3 KiwiSaver Providers in New Zealand?
There are many good KiwiSaver schemes out there, but which is best for you? It’s important to remember that all KiwiSaver providers must meet the same government minimum standards. So, in many ways, all KiwiSaver schemes are pretty similar.
So what makes one better than another? Well, some have slightly lower fees, and others have more investment options. And some will be more suitable for you than others, depending on your age, income, and life goals.
We’ve broken down some of the top KiwiSaver providers by key features to help you get started.
ANZ – Best for those new to investing :
The ANZ KiwiSaver Scheme provides a wide range of investment options, including conservative, balanced and growth funds. This means you can make sure your money is invested in a way that’s right for you, depending on your age and tolerance for risk. The scheme also offers low fees and an easy fee calculator, so you know exactly how much you’re paying each year.
AMP – Best for those looking for diverse investments :
The AMP KiwiSaver Scheme offers multiple investment funds to suit different investors. The scheme offers a unique feature which allows members to tailor their investments according to key life moments (like buying a first home or retirement). The scheme also has low fees and offers both online and face-to-face advice from AMP financial advisers.
Kiwi Wealth – Best for first home buyers :
Kiwi Wealth manages the Kiwi Wealth KiwiSaver Scheme and the Kiwi Wealth Investment Funds. The Kiwi Wealth KiwiSaver Scheme has been around since 2007, so it’s one of the oldest schemes around. It’s also one of the largest, with more than $6 billion in assets under management.
Some of the unique features of the Kiwi Wealth KiwiSaver Scheme include:
A choice between five different fund options. In addition to a Conservative, Balanced, Growth, and Aggressive option, there’s a Socially Responsible Investment (SRI) option that invests in companies that meet certain social and environmental criteria.
Now that you understand more about KiwiSaver, what are you waiting for? It’s time to change your financial future and start saving for retirement. The earlier you get started, the more money you can save and the more time there will be to grow your nest egg. Start by having your employer enroll you in KiwiSaver; then set up an online account and make your first contribution. It really is that easy!