SORTED – How KiwiSaver works and why it’s worth joining

KiwiSaver is a voluntary savings scheme set up by the government to help New Zealanders to save for their retirement.

It’s an easy and affordable way to save and invest for our retirement years. Most of us can benefit from joining KiwiSaver, if we haven’t already. 

Employees can choose to contribute 3%, 4%, 6%, 8% or 10% of your gross (before tax) wage or salary to our KiwiSaver account.

Employers are required to contribute close to 3% of your gross salary if you contribute.

There’s an annual government contribution as well, even if you’re not an employee – as much as $521 each year until you’re 65.

Your savings are invested on your behalf by the KiwiSaver provider of your choice. If you don’t choose a provider, Inland Revenue will assign you to a default KiwiSaver fund that can be a good solution for you. 

 How does KiwiSaver work?

A KiwiSaver fund is more than just a savings account. It’s similar to what we call a managed fund. Your fund manager invests your KiwiSaver savings on your behalf, which means your savings also earn returns over time.

How does KiwiSaver work?

• Your automatic contributions

• Employer contributions of close to 3% on top of your pay

• Government contributions (up to $521 every year!)

• Investment returns from all the contributions being invested for you by your KiwiSaver provider

• Any additional money you choose to put in. You can make voluntary contributions – lump sums or regular automatic payments – at any time, either directly to your KiwiSaver provider or through Inland Revenue.

You can use KiwiSaver to save for a first home

When buying your first home you may be able to make a one-off withdrawal of most of your KiwiSaver savings – as long as you’ve been a KiwiSaver member for at least three years. You also may even qualify if you have owned property previously.

Our KiwiSaver calculator can help you find out how much you’re on track to save for your first home.

Visit the Kāinga Ora website for more information on using KiwiSaver for a first home.

You can use KiwiSaver to save for retirement

If using KiwiSaver to save for retirement, you can’t touch your money until the age you get New Zealand Superannuation (NZ Super) which is currently 65. Note that KiwiSaver is open to those over 65 to join as well.

Find out how much you’re on track to save for your retirement using the KiwiSaver calculator. 

KiwiSaver funds come in five basic types

We’ve grouped the hundreds of KiwiSaver funds into five types to make things easier. Once you find which is right for you, it’s much simpler to find a fund of that type.

Each fund holds a mix of investments, and which type they fit into is based on how much of the more risky stuff, like shares and commercial property, is in the mix. The more risk you take on, the more potential you have for better results, but your balance will have more ups and downs along the way. 

Depending on how long you are investing for, and your attitude towards the ups and downs that can happen with investing, one type of fund will work particularly well for your situation.

Why you want to take advantage of KiwiSaver

The question of KiwiSaver is less ‘why’ and more ‘why not?’ – because of the benefits it offers.

• KiwiSaver contributions come out of your pay before you see it. This makes saving easy.

• If employed, your employer has to contribute at least 3% of your gross wage or salary into your KiwiSaver account. That’s on top of your own contributions.

• The government pays into your KiwiSaver account as well – an annual government contribution (if you are a contributing member aged 18 or over) of up to $521.

• As well as saving for retirement, you can also use KiwiSaver for buying your first home through a KiwiSaver first-home withdrawal.

• If you change jobs or leave the workforce your KiwiSaver account moves with you.

• If you experience hardship it is possible to access the funds in your account early.

• It is generally a lower-cost option to invest in managed funds.

You can also get information from the IRD website

Information from sorted.org.nz

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