In order to assist you with your long-term saving for retirement, a voluntary, work-based savings initiative called KiwiSaver has been designed. It is essentially hassle-free so that maintaining a regular savings pattern is easy. Do you know How does KiwiSaver works?
A wide range of membership benefits is available in order to encourage you to start saving. Regular contributions from your employer are included as well as annual member tax credit paid by the Government. Selected people are also eligible for help with the deposit on their first home.
How to make contributions
For the majority of the users, KiwiSaver will be work-based. This means that your employer will inform you about KiwiSaver, and your contributions will come directly out of your paycheck. Once you have chosen to join, you are able to choose a KiwiSaver scheme rate of either 3%, 4%, or 8%. Contributions will be deducted from your pay according to the rate you selected.
If you are either self-employed or unemployed, you can discuss with your KiwiSaver provider and agree upon an amount that you will pay directly to them each month.
Private sector companies called KiwiSaver providers to manage certain KiwiSaver schemes. Which KiwiSaver provider you invest your money with is entirely up to you. Your investment choices in a KiwiSaver scheme are at your own risk. KiwiSaver is not guaranteed by the government. See a list of some well know providers below!
Although all of the above-mentioned KiwiSaver providers may offer their own slightly customized KiwiSaver schemes, KiwiSaver works the same way for all customers. Here is the guide on how does KiwiSaver works.
How does KiwiSaver work?
- If you’re automatically enrolled, you are able to ‘opt-out, but only between 2 and 8 weeks of starting the job. Once you have joined, you have to contribute for at least 12 months.
- You may choose to join KiwiSaver at any time, although, once you do, you can’t opt-out.
- As an employee, you can choose whether you want to contribute either 3%, 4%, or 8% of your gross (before-tax) wage or salary, towards your KiwiSaver account.
- After contributing towards your KiwiSaver for 12 months, you can take a break from saving (called a ‘contributions holiday’) or carry on.
You can make voluntary contributions such as lump sums or regular automatic payments once you have joined. You can pay this either directly to the KiwiSaver provider or through Inland Revenue.
Who can join KiwiSaver?
- a New Zealand citizen, or someone who is entitled to live in New Zealand indefinitely
- People who normally live in New Zealand (with some exceptions)
- Anyone below the age of eligibility for New Zealand Super, which is currently 65
You can also be:
- Under 18
How can I join KiwiSaver?
The three ways to join KiwiSaver include;
- Automatic enrolment when you start at a new job
- Opting in through your current employed
- Using a KiwiSaver Provider to opt-in through
There are many great benefits to signing up with KiwiSaver and they may leave you wondering “well, why wouldn’t I sign up?” So by now, you must have understood how does KiwiSaver works?
- Your contribution is deducted from your pay before we see it. This makes saving easier.
- On top of your own contributions, your employer has to contribute at least 3% of your gross wage or salary into your KiwiSaver account.
- If you are contributing member ages 18 or up, the government pays into your KiwiSaver account as well. This is annual ‘member tax credit’ and may be up to $521.
- Not only can you save for retirement, but you can use KiwiSaver to help you buy your first home through the KiwiSaver HomeStart grant and home purchase withdrawal.
- Your KiwiSaver account moves with you according to whether you change jobs or leave the workforce.