KiwiSaver is a compelling initiative introduced by the Government to provide a number of incentives to help every New Zealander save for their retirement.
Contributions to your savings from the Government and your employer will help to grow your retirement nest-egg faster. The key incentives for individuals to join KiwiSaver are from the contributions gained from the Government and your employer.
Member tax credits
Subject to certain criteria, from age 18, you may receive member tax credits of up to 50 cents per dollar of qualifying member contributions up to $10 per week ($521.43 per annum).
From age 18, if you are employed and contributing to KiwiSaver your employer will generally contribute as well. Since 2007, employer contributions were 2% of an employees gross (pre-tax) salary or wages. From 1 April 2013, the compulsory minimum employer contribution rate increased to 3% of the employee’s gross salary.
Withdrawal to buy your first home
After you have been contributing to KiwiSaver for three years, you may be eligible to withdraw all your contributions, your employer’s contributions and the member tax credits in order to buy your first home (not an investment property). The Government’s $1,000 kick-start cannot be withdrawn to buy your first home.
The KiwiSaver HomeStart grant provides eligible first-home buyers with a grant of up to $5,000 for individuals and up to $10,000 for couples to put towards the purchase of an existing/older home. In addition, the new KiwiSaver HomeStart grant provides eligible first-home buyers with a grant of up to $10,000 for individuals and up to $20,000 for couples to help with the costs of purchasing a brand new home.
Entitlement to this subsidy will depend on your household income and the price of the home. The KiwiSaver HomeStart Grant is administered by Housing New Zealand.
Your KiwiSaver account stays with you
If you change jobs or leave the workforce, your KiwiSaver account goes with you.
After being a KiwiSaver member for 12 months, you can choose to take a break – called a contributions holiday. This can last between three months and five years. You can still contribute $1,042.86 each year in order to receive member tax credits of $521.43 p.a. from the Government.
If you are employed, you will need to contribute 3% or more of your gross (pre-tax) salary or wages that you earn at that job – this is deducted from your net (after tax) pay. Your employer is obliged to match your contributions.
If you are self employed or a non-worker, you can decide how much you contribute to KiwiSaver (certain conditions may apply, please see the relevant Investment Statement for details).
Benefits of KiwiSaver
- All contributions credited to your account, including Government contributions and your employer contributions, become yours at the expiry of the locked-in period.
- Your KiwiSaver account will be made up of contributions to your account, plus or minus investment returns, and minus any withdrawals, account fees and taxes.
- Up to $521.43 p.a. tax credit contributions in each scheme year (1 July – 30 June) from the Government will be applied to your account if you are over 18. The Government will contribute 50 cents for every dollar you contribute UP TO a maximum of $521.43 p.a. – of course you have to be contributing to qualify for this.
- Employee minimum contributions are 3% of gross salary, and contributions must be made for 12 months. After that time you can request a contribution holiday for up to 5 years at a time.
- You can elect to contribute either 3%, 4%, or 8% of your gross salary, with 3% being the minimum from your pay. If you are not employed you can contribute directly to your KiwiSaver account.
- Employer contributions at dollar for dollar up to 3% of your gross salary. This is paid by employers to your account without coming off your salary. The employer obligation is to match your contributions at the minimum level only. No employer contributions are payable during a contributions holiday.
- Investment returns on all the accumulated contributions (government, employer and you) belong to you individually (note: investment returns can be negative).
- KiwiSaver schemes generally have an independent Trustee appointed to look after the benefits and safeguard the interests of members.