Saving for retirement - the KiwiSaver way

Most of us need, at some point, to save something for our retirement.  The alternative is to rely totally on New Zealand superannuation.  One of the best ways to save for retirement is through KiwiSaver - it is “best” because the government subsidises your ongoing savings each year.  If you are an employee, your employer may also subsidise your savings.  The government and employer subsidies make KiwiSaver an attractive option for part of our retirement savings.  It is also a good idea to save some money outside KiwiSaver.


Who can join KiwiSaver?

You can join KiwiSaver, if:

  • you live, or normally live, in New Zealand, and
  • you are a New Zealand citizen, or entitled to stay in New Zealand indefinitely, and
  • you are under the age of eligibility for NZ Super (currently age 65).

If you are eligible to join KiwiSaver, you should think about joining SuperLife’s KiwiSaver scheme (“SuperLife”). SuperLife is one of the best KiwiSaver schemes.


How much must you save?

This depends on whether you are an employee.

If you are an employee, you must save a minimum of 3% of your pay.  You can choose to increase the minimum to 4%, 6%, 8% or 10%.  Your KiwiSaver contributions are deducted from your pay each pay day, through the PAYE tax system. 

After 12 months’ membership, you can stop saving the minimum by telling the IRD that you want to go on a savings suspension.  This can be for up to 1 year and can be renewed at the end.  You can restart saving at any time.

If you are not an employee, you choose how much to save, including nothing.  You can change the level at any time.  SuperLife has no minimum contribution rate.  If you are under age 18, it is probably best to save nothing in KiwiSaver.  If you are 18 or older, you should save what you can afford and ideally $1,042.86 a year, ($87 a month).  This maximises what the government pays.


What does the government pay?

The government will pay, if you are 18 or over, each year a subsidy known as the government contribution. This is equal to half the savings you made during the year, up to the level of $521.43 (equivalent to $10 a week or $43 a month).

After three years, you may also qualify for a HomeStart grant of $1,000 for each year you save, up to $5,000 ($10,000 for a couple) if you are buying an existing house.  If the house is a newly built home the HomeStart grant is doubled.


What does an employer pay?

If you are an employee and are 18 or older, your employer will subsidise your KiwiSaver savings. The employer subsidy is 3% of your pay.  The employer subsidy is taxed and the net amount is paid to your KiwiSaver Account.

There are some exceptions to the requirement for your employer to save – if you already receive an employer contribution to another superannuation scheme, you may not be entitled to a KiwiSaver employer contribution as well.  Also, your minimum KiwiSaver savings must be deducted from your pay and paid through the IRD.


Where is my KiwiSaver Account invested?

Your savings, the government payments and any employer savings go into your KiwiSaver Account, which is invested in the investment option(s) you choose made available by your provider. 

Under SuperLife, you can choose from a wide range of options – from cash and other lower-risk options, to shares and higher-risk options – and change your options at any time. 

The return you get depends on the options you choose and what happens in the markets.


When can I withdraw my savings?

KiwiSaver is mainly about saving for retirement. You will be able to withdraw your savings as a lump sum at the later of, when you reach the age of eligibility for NZ Super (currently when you turn 65) and after five years’ membership.

You can withdraw some of your savings earlier (but conditions apply):

  • after three years’ membership, if you buy your first home, or Housing New Zealand determines that you are in the same financial position as someone buying their first home
  • if you experience significant financial hardship
  • if you suffer serious illness
  • if you move overseas permanently.

On death, your KiwiSaver Account is paid to your estate.

For full details of the benefit conditions, read our KiwiSaver product disclosure statement on the website or call SuperLife (0800 27 87 37) for a copy.


What if I want to save more?

Under KiwiSaver, you can save more direct to your provider. However, if you wish to save more, you are probably better to save the extra under SuperLife’s other investment options and not under KiwiSaver. SuperLife has the same investment options for KiwiSaver and non-KiwiSaver savings plans. The non-KiwiSaver plan has more flexibility, for example, it is not locked up to retirement.

Over time, it may become possible to compare one scheme against another by looking at the net-of-tax and net-of-fee returns of similar options, but it will be many years before there is enough data and by then it will be too late - the higher initial costs will have been incurred.


NZ Super

Your KiwiSaver benefit does not affect your NZ superannuation benefit.

After tax NZ Super rates for From 1 April 2018
Married couple $32,892.08 p.a.
Single living alone $21,379.80 p.a.
Single (sharing) $19,735.04 p.a.

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1“Best” in this context means SuperLife:

  • low fees
  • high flexibility
  • full range of investment options
  • is a specialist provider independent from the investment managers.

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