The ultimate beginners guide to KiwiSaver
Wondering how KiwiSaver works? You’re not alone. Here are the answers to some of the most common KiwiSaver questions.
What are the main benefits of KiwiSaver?
KiwiSaver is designed to help New Zealanders save for their retirement. As well as preparing you for your later years, your KiwiSaver fund can be used towards the purchase of your first home. You may also qualify for a KiwiSaver HomeStart grant – an additional sum towards your first home.
As well as your contributions from your salary or wages, the government also puts money into your KiwiSaver each year. This is called a Member Tax Credit and is applicable if you’re between 18 and 64. The government will give you up to $521 per year – if you are part of KiwiSaver for a lifetime that’s close to $36,000!
If you’re employed, your employer has to contribute at least 3% of your gross salary or wage into your KiwiSaver account. Alongside your employer contribution, you can set your personal contribution rate at 3%, 4%, or 8% of your earnings.
How do I get the KiwiSaver government contributions?
All you need to do is contribute to your KiwiSaver account. If you’re between 18 and 64, the government will contribute 50 cents for every dollar you put in, up to a maximum of $521 per year.
To receive the full KiwiSaver Member Tax Credit each year, you need to contribute at least $1043, which equates to around $20 per week.
If you’re earning $35,000 or more, and you’re contributing 3% or more, you will reach the full amount automatically. If you earn less than $35,000, or you’re self-employed and don’t regularly contribute to your fund, you will need to top up your KiwiSaver to receive the full $521 from the government.
Does the government hold my money?
No. Your KiwiSaver account belongs to you – it’s your money, in your name. KiwiSaver accounts are set up as investment funds. The government only facilitates the savings process through Inland Revenue, making sure all your contributions (and any employer contributions) go into your account.
Where does my money go when I contribute?
Your money goes directly into your KiwiSaver account which is part of a bigger fund. This fund is managed by a private provider who invests your money in shares, cash, fixed interest, and property.
When you set up your KiwiSaver, you choose your fund. If you don’t choose, you will go into a default fund (one of nine). You can change your KiwiSaver fund at any time.
The way your money is invested will depend on what type of fund you’re in: Defensive, conservative, balanced, growth or aggressive.
What if a KiwiSaver provider goes out of business?
KiwiSaver funds are set up as trusts to keep your money secure. If a KiwiSaver provider’s business failed, your investments would not be affected.
How come I don’t see my KiwiSaver money right away?
It can take up to three months for your contributions to reach your KiwiSaver account. Your employer directs them to Inland Revenue, who then checks that everything is correct. Inland Revenue then transfers the funds to your provider, including any interest earned during that time.
Could I lose my money?
KiwiSaver funds are set up and designed to keep growing – it would be very difficult (near impossible) to lose all of your money in KiwiSaver. However, your funds are not guaranteed by the government. Because KiwiSaver is essentially an investment fund, it is natural that it will fluctuate up and down in value.
If you have any KiwiSaver questions, please get in touch with us.
This article contains general information and does not take into account your individual requirements. Before making any changes to your insurance portfolio, please seek advice from a professional financial adviser.