What is KiwiSaver?
KiwiSaver is a national initiative that commenced on 1 July 2007 to promote long term retirement savings. It is not intended to supersede existing superannuation arrangements, but to provide a vehicle for employees to be able to save by way of direct deduction from their salary or wages. It is also open to most people who aren't employed. KiwiSaver schemes are managed independently of the Government by investment providers such as FANZ.
The KiwiSaver legislation applies to most employees who are New Zealand citizens, or entitled to be in New Zealand indefinitely under the Immigration Act 1987. If an employer pays employees based in New Zealand through the PAYE system, they must usually enrol those who start a new job in KiwiSaver and will have to make deductions from their gross salary and wages and pay these to the IRD, beginning on their first pay run. An employee who is enrolled but does not want to be a KiwiSaver member can opt out in a set period after starting the new job. A person who wishes to join KiwiSaver but doesn't start a new job can also join.
Benefits of KiwiSaver
Employer contributions: 3% of your before-tax pay
If you are employed it’s easy to save directly through your pay. You choose to contribute 3, 4, 6, 8 or 10% of your before-tax pay. If you're eligible, your employer will usually also make contributions. These will be equal to 3% of your before-tax salary or wages. Your employer can contribute more than this if you have negotiated this directly with them.
Your employer’s contributions have tax taken out before they're added to your KiwiSaver account.
Government Contribution - (formerly known as Member Tax Credits)
Once you’ve joined KiwiSaver, you could qualify for the Government Contribution. The Government will add 50 cents for every dollar you save, up to a maximum of $521.43 a year if you're eligible.
Click here for further information on how Government Contribution payments are calculated.
Using your KiwiSaver to buy your first home
If you’re buying your first home or land to build your first home (or you’re in the same financial position as someone who is buying a first home), you may be able to withdraw most of your KiwiSaver savings to help pay for it after you have been contributing to your KiwiSaver for three years.
Click here for more information on the withdrawal process.
First Home Grant
If you’ve been making regular contributions to a KiwiSaver scheme for at least three years, you can also apply for the First Home Grant through Kāinga Ora (previously Housing New Zealand).
Buying an existing or older Home?
You could be eligible for a $1,000 grant for each year you’ve contributed to KiwiSaver, up to a maximum of $5,000.
Buying a newly built home, or planning to build a home?
The grant doubles, to $2,000 per year (after three years of contributing) up to a maximum of $10,000 (after five years of contributing).
Buying a home with other people?
Each of you could qualify for a grant, up to a maximum total of $20,000 towards your first home.
The Home Start Grant is paid by the government and administered by Kāinga Ora. There are various criteria around who is eligible, including minimum contribution levels and regional purchase price caps.
Find out more at https://kaingaora.govt.nz/home-ownership/first-home-grant/ or by calling Kāinga Ora on 0508 935 266.
Australian Superannuation Transfers
If you have worked in Australia and contributed to the Australian Superannuation Guarantee (“ASG”) system you will be able to transfer your savings to your KiwiSaver account.
Click here for further information if you would like to transfer your ASG to your Lifestages KiwiSaver account.
A member’s investment in a KiwiSaver scheme and any returns are not guaranteed or secured in any way by the Crown. Investments are subject to investment risk, including possible delays in repayment and the loss of some or all of the amount invested.
As the Scheme is a KiwiSaver scheme, in most cases your money is locked in until you reach qualifying age.
This is usually the later of:
When you qualify for New Zealand Superannuation (currently age 65); or
Five years after you joined a KiwiSaver scheme, or if you transferred from a complying superannuation fund, five years after you joined that scheme (the “five year minimum membership requirement”).
If you joined KiwiSaver on or after 1 July 2019, the five year minimum membership requirement does not apply.
From 1 April 2020, if you are subject to the five year minimum membership requirement, you can opt out of that requirement (although if you do that, from age 65 you won't be eligible to receive any Government contributions and your employer can stop its contributions).
Restrictions on withdrawals are set out in the KiwiSaver Act 2006 and within the “Other Material Information” document.
Suspending your KiwiSaver Contributions
If your financial situation changes, you may want to take a short break from making KiwiSaver contributions. Depending on how long you've been a member, it's possible to take a savings suspension.
If you've been in KiwiSaver a year or more
All employees who have contributed and been a member for 12 months or more can have a savings suspension for 3 months to 1 year. You don't need to give a reason and you can have as many savings suspensions as you want. You can take them back-to-back.
It is important to note that while you’re on a savings suspension you will not get employer contributions unless your employment agreement states otherwise. If you want to get the government contribution you may need to make voluntary payments. It is important to note that any reduction in contributions will have a material impact on the value of your KiwiSaver account when you reach your retirement age.
You can start or stop your contributions at any time while you're on a savings suspension but if the change is within 3 months of the last change, your employer needs to agree. Please note that the Inland Revenue Department (IRD) is responsible for administering the Savings Suspension process.
If you've been in KiwiSaver less than a year
You can apply for an early savings suspension, if you've made a KiwiSaver contribution and you're experiencing, or likely to experience financial hardship. When you apply, the IRD will need to see evidence of financial hardship for reasons outside your control. If your financial circumstances have changed for reasons within your control, your application may not be accepted by the IRD. The default period for a savings suspension is 3 months. Depending on your circumstances the IRD may give you up to 1 year.
Want information on the Lifestages KiwiSaver Scheme?
FANZ offer the Lifestages KiwiSaver Scheme