What is KiwiSaver?
KiwiSaver is a voluntary, work-based savings scheme that was launched on 1 July 2007. KiwiSaver focuses on encouraging saving through the workplace allowing for deductions to be taken directly out of salary or wages and provides a way to reach a broad section of the population. All employers are required to make KiwiSaver available to new and existing employees.
How does KiwiSaver work?
New employees
A person who is over 18 years (but under 65) and starting a new job will be automatically enrolled in KiwiSaver (unless their employer offers another approved savings scheme open to all employees). There are exceptions currently, for example, casual agricultural workers or people on a temporary contract for 28 days or less are exempt from being automatically enrolled. The employer starts making KiwiSaver deductions from the employee’s first pay and continues unless the employee opts out. After starting a new job, an employee can opt out any time from the end of week two through to the end of week eight and have all contributions refunded.
Existing employees
Existing employees can also join KiwiSaver. To have deductions started, they simply sign up with the KiwiSaver scheme provider of their choice or let their employer know they want to opt in.
Self employed, under 18’s and those not working can also join KiwiSaver. Refer to those specific sections within our website for more details.
What is the Government’s role in KiwiSaver?
The Government provides a one-off kick-start by contributing $1,000 to a member’s first KiwiSaver account, and also makes an ongoing contribution towards the fees charged by scheme providers. Savings are locked in until the employee reaches the age of eligibility for New Zealand Superannuation (currently 65), or for a minimum of five years, whichever is later. There are exceptions – for first home purchase, significant financial hardship, serious illness, death, or permanent emigration (terms and conditions apply). KiwiSaver also offers a first home deposit subsidy (provided by Housing New Zealand) of $1,000 for each year of contributions to a scheme, up to a maximum of $5,000. To be eligible a KiwiSaver member must have been saving for at least three years and meet certain criteria.
Is participation in KiwiSaver compulsory?
All New Zealand residents below the age of eligibility (65) for New Zealand Superannuation are able to join KiwiSaver. However, participation is not compulsory because it may not suit everyone, for example:
- Those who would be better off repaying debt
- Those who may not wish to save or are saving for something else.
- Those on low incomes and for whom New Zealand Superannuation may provide an adequate income in retirement.
It is recognised that each individual’s circumstances will be different. KiwiSaver is another option for New Zealanders to increase their own wellbeing and financial independence, particularly in retirement.
Can I choose which KiwiSaver scheme to join?
Yes you can. Individual choice is important in encouraging people to take an active interest in their financial decisions. All KiwiSaver members will be able to:
- Choose their KiwiSaver scheme, KiwiSaver provider, and the funds they want to invest in from that KiwiSaver scheme, such as funds with a conservative, balanced, or growth investment profile.
- Choose a contribution rate of an amount equal to either 2% (default rate if no choice is made), 4% or 8% of their total gross salary or wages (including bonuses, commission and overtime).
- Transfer between KiwiSaver schemes at any time.
- Cease contributions by applying to Inland Revenue for a contributions holiday after a minimum contribution period of 12 months. The contributions holiday will be for a period of up to five years (minimum three months) and can be renewed at the end of the period.
- Individuals will be given information to help them make decisions about KiwiSaver.
- Members will be able to select their own investment product and can change scheme providers, but can only have one KiwiSaver scheme provider at any time.
What happens if a new employee doesn’t choose a KiwiSaver scheme?
The Inland Revenue will allocate new employees to a fund in a default KiwiSaver scheme with a conservative investment profile.
What is a default scheme provider?
A default provider is a company chosen by the Government to offer a default KiwiSaver scheme to people who don’t select their own scheme. The Government has named six default providers of KiwiSaver schemes.
Do people have to join a default provider KiwiSaver scheme?
No, people do not have to join a default provider KiwiSaver scheme. All employees (with some exceptions, currently for temporary employees) starting a new job are automatically enrolled in KiwiSaver with the ability to opt out. Those employees who do not opt out will be allocated to a KiwiSaver scheme in one of three ways:
- the member can actively choose a KiwiSaver scheme; or
- if no KiwiSaver scheme is chosen by the member, then they will be allocated to their employer’s preferred KiwiSaver scheme if the employer has one; or
- if the employer has not chosen a preferred KiwiSaver scheme, then the member will be automatically allocated to a default KiwiSaver scheme by Inland Revenue.
Can new employees opt out of KiwiSaver?
Yes, new employees will be able to opt out of KiwiSaver from the end of week two, after starting their job, until the end of week eight.
When can I access my KiwiSaver funds?
If an employee does not opt out of KiwiSaver after the first eight weeks of employment, their savings are locked in until the employee reaches the age of eligibility for New Zealand Superannuation (currently 65), or for a minimum of five years, whichever is later. There are exceptions – early withdrawals may be permitted for first home purchase, significant financial hardship, serious illness, death, or permanent emigration (terms and conditions apply).
How will my KiwiSaver funds be paid out to me?
Upon reaching the age of eligibility for New Zealand Superannuation (or completing 5 years’ membership if later) all members will have the option of withdrawing the funds as a lump sum (although providers may choose to also offer other options, such as an annuity or regular withdrawals).
What are the contribution rates for KiwiSaver?
Employees can choose a contribution rate equal to either 2%, 4% or 8% of the total gross salary or wages paid by the employer (including bonuses, commission and overtime). If no choice is made, the default rate is 2%. Employees can also make a lump sum payment whenever they like.
Employers have to match their employees’ contributions to KiwiSaver as per the table below:
| From |
Monthly employee contribution
(% of gross salary) |
Employer contribution
(% of gross salary) |
Total employee and
employer contributions
(% of gross salary) |
| 1 April 2009 |
2 |
2 |
4 |
When will KiwiSaver contributions start being deducted from an employee’s pay?
For all employees who enrol or are automatically enrolled in KiwiSaver, contributions will be deducted from their first pay after starting their new job and paid to Inland Revenue. The Inland Revenue will then forward the contributions on to the employee’s KiwiSaver provider.
How are the 2 per cent, 4 per cent and 8 per cent rates be calculated and what sort of amounts do they represent?
The 2%, 4% or 8 % contribution will be based on an employee’s before tax pay (though met out of after-tax pay) and includes salary or wages, bonuses, commission, extra salary, gratuity, overtime or other remuneration of any kind.
How much is this?
|
Pre tax income
|
Weekly 2% contribution
|
Weekly 4% contribution
|
Weekly 8% contribution
|
|
$20,000
|
$7.69
|
$15.38
|
$30.77
|
|
$40,000
|
$15.38
|
$30.77
|
$61.54
|
|
$60,000
|
$23.07
|
$46.15
|
$92.31
|
|
$80,000
|
$30.77
|
$61.54
|
$123.08
|
|
$100,000
|
$38.46
|
$76.92
|
$153.85
|
How do I change my contribution rate?
You simply need to notify your employer that you wish to change your % contribution rate.
Are there any tax advantages to be gained by enrolling in KiwiSaver?
Yes there are. The government will match all members' own contributions (whether they are employed or not, provided they are aged 18 or over) with a tax credit of up to $20 per week. This is only available to persons enrolled in a KiwiSaver scheme who are principally resident in New Zealand. Employers are required to match their employees’ contributions to KiwiSaver to 2 per cent of an employee’s gross income. These contributions are tax free.
What happens if I change jobs?
KiwiSaver is transferable if you change jobs so simply advise your new employer that you are already a member of KiwiSaver and they will commence making deductions from your pay packet.
How does a ‘contributions holiday’ work?
After 12 months in the scheme, KiwiSaver members will be free to stop and start contributing as they wish by applying for a contributions holiday for up to five years at a time. At the end of the five years, contributions will resume unless a further option to cease them is exercised. Inland Revenue will oversee this process. The minimum period for a contributions holiday will be three months unless the employee’s employer agrees to a shorter period. This minimum period is to reduce compliance costs for employers in having to stop and start contribution deductions frequently.
How will KiwiSaver help first home buyers?
KiwiSaver will provide the ability for KiwiSaver members to make a one-off withdrawal of their own savings to use for the purchase of a first home (excluding the kick-start contribution of $1,000 and the tax credit amount), following a minimum of three years’ participation. Terms and conditions apply.
A deposit subsidy to people who have contributed to KiwiSaver for at least three years to assist with the purchase of their first home will also be available. This will be $1,000 for each year of contribution, up to a maximum of $5,000. Regional house price caps and household income caps will be used to help target this assistance. This subsidy is provided by Housing New Zealand. Terms and conditions apply.
