If you are a New Zealand citizen or entitled to live and work in New Zealand and currently living in the country, then you are eligible to join KiwiSaver.
KiwiSaver is a relatively new type of subsidised, voluntary, government savings scheme created to supplement other savings tools.
If you need advice about the KiwiSaver scheme or would like more information on how to supplement your KiwiSaver savings, reach out to our Qualified Financial Advisers today for your no obligation FREE Discovery Session.
What Is KiwiSaver In New Zealand?
KiwiSaver is a voluntary savings scheme run by the government to help New Zealanders to save for their retirement.
Members can choose to contribute a minimum amount of 3% to their KiwiSaver account.
If you wish to contribute more, you can choose from 4%, 6%, 8% or 10% of your gross salary. If you have an employer, they will match your contributions with close to 3% of your gross income.
The government will also make a contribution annually of 50 cents for every dollar you contribute, up to $521 a year.
There are many KiwiSaver providers to choose from who will invest your savings on your behalf. If you don’t choose a provider, Inland Revenue will assign you to a default KiwiSaver fund that works for you.
How Does KiwiSaver work?
If you’re 18 years or over, you will be automatically enrolled into KiwiSaver if you start a new job (with a few exceptions). Your KiwiSaver account is not just a savings fund; it has the additional benefit of a managed fund. This means a fund manager will invest your KiwiSaver savings on your behalf so that you can earn returns on your savings over time.
Your KiwiSaver account can continue to grow with:
- Your automatic contributions
- Your employer contributions
- Government contributions
- Investment returns
- Any additional personal voluntary contributions
There are many different types of KiwiSaver funding available and the right one for you will depend on how long you wish to save for and how much risk you are willing to take. The higher your risk profile, the higher the potential for improved performance, but with more variability in the day to day balance.
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What Can I Use My KiwiSaver For?
Whatever your financial plans are, your savings can be used to help meet your needs:
Saving for a First Home – if you’ve been a member for at least 3 years, you may be eligible to withdraw most of your KiwiSaver contributions to buy your first home. If you’ve owned property previously, this may also apply to you.
You may also be eligible for the First Home Grant from the government which grants you up to $5,000 towards buying an older home or up to $10,000 towards a new home or land to build upon. Find out more about this grant at Káinga Ora website.
Saving for Retirement – If you choose to use your KiwiSaver to save for retirement, you can only withdraw after the age you are qualified for New Zealand Superannuation (NZ Super). Currently Kiwi’s receive NZ Super at the age of 65.
Find out how much you should save for retirement with our retirement calculator or by getting in touch with the experienced Qualified Financial Planners at MyFuture.
What Are The Main Benefits Of KiwiSaver?
Although KiwiSaver is a great savings vehicle with some good benefits, it’s not appropriate for everyone. It’s important to understand that your KiwiSaver funds are locked away until you’re 65 (unless you meet any of the criteria to withdraw below). So if you’re planning on retiring early, then you won’t be able to rely on any of your KiwiSaver funds to help provide an income for your early retirement. Also, at this stage you can only withdraw KiwiSaver for your first home purchase.
This means if you find you’ve been priced out of the NZ housing market and decide to put your KiwiSaver funds to good use by purchasing a more affordable investment property in a different location, you won’t be able to use your KiwiSaver funds to do so – this could have serious consequences on your long-term wealth creation potential.
Although KiwiSaver might not be your only savings tool, it is a great supplement to your other financial tools as there are many benefits to KiwiSaver. Investing in KiwiSaver is a no brainer for every New Zealander because:
- Your KiwiSaver contributions come straight out of your pay, making saving easy.
- Your employer has to contribute on top of your own contributions.
- You receive government contributions annually as well.
- You can choose whether to save for your first home or for retirement.
- Your KiwiSaver account moves with you if you change jobs or leave the workforce.
- There are ways to access your KiwiSaver funds should you find yourself in significant financial hardship.
- It offers a low cost option to invest in managed funds.
When Can You Withdraw From KiwiSaver?
Although KiwiSaver is designed for retirement and first home savings, you can also apply to withdraw some of your savings if you are suffering or likely to suffer from significant financial hardship.
Significant financial hardship is defined in the KiwiSaver Act as financial difficulties arising because of:
- the inability to meet minimum living expenses
- the inability to meet mortgage repayments on your principal family residence resulting in the mortgagee seeking to enforce the mortgage on the residence
- the cost of modifying a residence to meet special needs arising from a disability of a you or a dependent
- the cost of medical treatment for an illness or injury of you or your dependent
- the cost of palliative care for you or your dependent or the cost of a funeral for a dependent or
- If you are suffering from a serious illness.
Our Qualified Financial Advisers at MyFuture can provide comprehensive financial guidance to get you started with your KiwiSaver today! Get in touch for your no obligation FREE Discovery Session.