What is KiwiSaver and how does it work?
KiwiSaver is a voluntary long-term savings scheme designed to help New Zealanders save for their retirement.
Your KiwiSaver savings are made up of:
- your own regular contributions (through PAYE, if you are an employee);
- contributions from your employer,if you are employed (this is mandatory); and
- contributions from the government.
You can either choose which KiwiSaver scheme you wish to join, or else be enrolled in one of the default schemes. Your funds are generally not available until you qualify for New Zealand Superannuation (currently at the age of 65).
If you're an employee, you are automatically enrolled in a KiwiSaver scheme when you start your job; you can choose to contribute 3%, 4% or 8% of your gross wage or salary to KiwiSaver, while your employer must contribute a minimum of 3% of your gross salary. If you don’t want to join KiwiSaver you need to opt out within eight weeks of being enrolled.
Someone who is not working, or is self-employed, can still join but would miss out on the employer contributions.
If you enrolled in a scheme before 21 May 2015 you would have received a Government kick-start contribution of $1000 after three months.
Each year your KiwiSaver account will receive a member tax credit (MTC) contribution which is calculated at 50c for every dollar of your contribution for that year – up to the maximum of $521.43.
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Who can start a KiwiSaver account?
You can start a KiwiSaver account as long as you are:
- aged under 65 years (if you are aged under 18 years, you'll need the consent of your legal guardian and you won't receive the member tax credit nor employer contributions)
- a New Zealand citizen or allowed to live in New Zealand indefinitely
- living in, or usually living in New Zealand.
To join KiwiSaver:
- if you are not already enrolled in KiwiSaver, your employer will automatically enrol you when you start a new job, or
- you can contact a KiwiSaver provider directly, or
- if your employer didn’t automatically enrol you, you can ask to enrol in KiwiSaver through your employer by asking for an employee information pack and KiwiSaver deduction form.
You can contribute to your account by making regular payments or on a lump sum basis. Some KiwiSaver providers may require minimum contribution levels - you should check this out before you sign up.
If you are enrolled automatically by your employer you have eight weeks to opt out; but once you choose to join KiwiSaver you can’t opt out.
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How do I choose which KiwiSaver provider to sign up with?
It’s a good idea to do some research on some of the providers, and find out:
- whether they have an investment fund appropriate for your risk profile (depending on your situation, whether you can tolerate a period of low returns on your investment) - you can find out what your risk profile is, with this Sorted tool;
- what the returns have been in the past;
- what fees they would charge you;
- what kinds of information would you receive about your savings, how often and whether it’s presented in a way you can understand;
- whether there is a minimum contribution amount you would need to make, and what it is;
- whether the provider tries to make ethical or socially responsible investments.
Sources to help you choose include Sorted’s online tool which compares the fees, returns and associated services of a range of KiwiSaver scheme providers; and CanStar has a report which rates KiwiSaver scheme providers according to their fees, returns and services, and also has information to help you determine your risk profile.
If you can’t decide, you can always stay with the default provider to which you were allocated to when you were automatically enrolled.
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How do I change to a different KiwiSaver scheme provider?
You can change to a different KiwiSaver provider at any time, but be aware that some KiwiSaver scheme providers charge their clients transfer fees for switching to another provider.
If you find a KiwiSaver scheme provider which you think better suits your needs, just apply directly to the preferred scheme provider and they can help you transfer.
Read our previous question about choosing a new KiwiSaver scheme provider.
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I was automatically enrolled in KiwiSaver by my employer - can I get out of it?
If you were automatically signed up for KiwiSaver by your employer, and are eligible for KiwiSaver, you have only eight weeks to opt out. If it has been more than eight weeks then you can’t opt out – but once you’ve been a member for 12 months you can take a contributions holiday.
To opt out, you need to complete a new employee opt out request form.
After the eight week period, you can only opt out under certain circumstances:
- your employer didn't supply you with a KiwiSaver employee information pack (KS3) within 7 days of you starting your job, or
- Inland Revenue didn't send you an investment statement for the default KiwiSaver scheme that you were allocated to, or
- your employer didn't give you an investment statement for their chosen KiwiSaver scheme, or
- events outside your control prevented you from delivering your opt-out notice on time, or
- you were automatically enrolled when you shouldn't have been (eg you are an overseas resident here on a working visa).
Your application to opt out will generally take 30 days to process, but if it’s been more than eight weeks since you were signed up to KiwiSaver you could be waiting up to three months for a refund. This is because Inland Revenue may have to get the money from the KiwiSaver provider, before refunding it to you.
Note that if you chose to enrol into a KiwiSaver scheme (i.e. you weren’t enrolled automatically at the start of a new job), you cannot opt out.
For more information on leaving the KiwiSaver scheme if you were automatically enrolled, see the KiwiSaver webpage about opting out.
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Can I take a break from paying into KiwiSaver?
If you’re self employed, you can generally take a break from paying any time you like – as long as you still fulfil your provider’s requirements (they may require you to contribute a minimum yearly amount and/or set payment periods e.g. monthly or quarterly). If this is you, it’s best to talk to your provider first.
If you are an employee, you would have to apply for a contributions holiday. Generally, you can take a contributions holiday only if you have been a member for at least twelve months. This can be for a period between three months and five years – and there isn’t a limit to the number of contributions holidays you can take.
If you’ve been with KiwiSaver for less than twelve months you can apply to Inland Revenue for an early contributions holiday, but they would only consider granting you one if you’re experiencing financial hardship.
An early contributions holiday is for three months, but you may be able to make an arrangement with Inland Revenue for a longer contributions holiday.
To apply for a contributions holiday, you can:
- send a completed Contributions holiday request form to the Inland Revenue or
- Apply online if you are registered for My KiwiSaver or
- call Inland Revenue on 0800 549 472 (0800 KIWISAVER), or 04 978 0800 if calling from a mobile phone.
More information about contributions holidays is on the KiwiSaver website.
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Can I transfer my Australian superannuation funds into my KiwiSaver account?
Yes. An agreement between the Australian and New Zealand governments allows the transfer of Australian retirement savings to a New Zealand KiwiSaver account if they are:
- New Zealanders who have been living and working in Australia and are returning to live in New Zealand permanently; or
- Australians who are permanently moving to New Zealand.
You don’t have to transfer your retirement funds, but if you do there are some rules around what you do with the funds. For example if you are transferring your Australian retirement savings to New Zealand they have to go into a KiwiSaver account - you can’t put it into other investments or spend it before you reach the retirement age and the funds can’t be withdrawn for the purchase of a home.
More information about the transfer of retirement funds between Australia and New Zealand is on the Financial Markets Authority website and the CanStar website.