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If you join KiwiSaver, the government pays a $1,000 kick-start to your KiwiSaver Account. It is paid after 3 months and on top of the ongoing government paid “member tax credits”.

To receive the $1,000, you need to join and must then save at least the minimum amount for at least a year. You can save any amount above the minimum. Your minimum savings depend on your employment status:

• While you are an employee: 2% of your gross taxable pay increasing to 3% from 1 April 2013.
• If you are self employed or not in employment: Nil. i.e. any amount you agree to pay.

In either case, after 1 year, you can stop saving by going on a “contributions holiday.”

The accumulated value of the $1,000 depends on the after-tax investment earnings and the fees payable. Savers should also consider the impact of inflation and how much the accumulated value will buy at retirement. If the net investment return was 5% p.a., the accumulated value is shown below. A 5% p.a. net return is possibly equivalent to a 2.5% p.a. real return i.e. after inflation. The second column shows the value of the accumulated savings in today’s money (i.e. after allowing for rising prices).



 At alternative net investment returns, the accumulated future value of $1,000 over different periods is:

Where you qualify for a first-home withdrawal, you can withdraw the investment earnings on the $1,000 but not the $1,000. The $1,000 must stay for your retirement, or until you permanently emigrate or become seriously ill.

Assumptions

The calculations assume the net returns shown. “Net” is net of tax and investment changes. They also deduct SuperLife’s $33 a year administration fee.

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