This website is operated by Moneyworks NZ Ltd and is not endorsed by, or affiliated with, the New Zealand government or Inland Revenue. Moneyworks NZ Ltd is using the KiwiSaver trade mark and logo under licence from Inland Revenue. To view the official New Zealand government KiwiSaver website, please click Here
What is KiwiSaver & How Does it Work?
KiwiSaver was launched on 1st July 2007 to provide a framework for New Zealanders’ to save for their retirement. The structure of KiwiSaver was innovative and has won admiration and plaudits internationally.
KiwiSaver has changed over the years since launch, and is likely to continue changing. However, it is still a very attractive way of investing and Moneyworks recommends that KiwiSaver should form the core of your retirement savings.
Key Features of How KiwiSaver Works:
1. You can only have one KiwiSaver account.
This reduces the issues associated with Australian superannuation schemes, where a person can have multiple superannuation schemes, all with their own fees, and can end up with a lot of small balances. However, as KiwiSaver balances get larger, it becomes more important to choose the best risk profile and KiwiSaver provider for you.
2. You choose your own KiwiSaver provider:
There are 16 KiwiSaver providers and 141 different funds to choose from. These range from the very large providers and funds to boutique funds. You should work out your risk profile and get advice on which KiwiSaver fund would be appropriate for you. You can change your KiwiSaver provider at any time. However, it is important to note that in doing so, any underlying investments will have to be sold, and then reinvested with the new provider. This may result in small transaction costs for you. It is also important that you check whether there are any withdrawal fees to transfer. A small number of KiwiSaver providers have such fees.
3. Government incentives within KiwiSaver
Any NZ resident living in NZ and under the age of 65, receives
- a. Until May 21st 2015, people who joined KiwiSaver received a $1000 Kickstart payment into their KiwiSaver account. This can only be withdrawn on retirement, or paid out on death.Since May 21st 2015, new members to KiwiSaver will not receive this payment.
- b. Member Tax Credit. For each $1 that a member invests in KiwiSaver the Government will match this with a 50 cent payment – up to a maximum of $1043 contribution from the member. The Member Tax Credit is paid after the end of the 30th June year.
4. Low fees for KiwiSaver funds
Before the introduction of KiwiSaver, a large number of high fee managed fund investment options were offered. To become an authorised KiwiSaver provider the scheme was required to have acceptable fees to the regulator. This has led to lower fees (which directly benefit the investor) on not only KiwiSaver, but has flowed through to other managed funds as well. Most KiwiSaver funds have a monthly membership fee plus a fee charged as a % of the assets that you have invested in that fund.
5. Multiple contribution options to KiwiSaver
If you have PAYE deducted from your income you can select to contribute to KiwiSaver at 3%, 4% or 8% of your income. The contribution percentage is based on your gross earnings. You can also make voluntary contributions to KiwiSaver on top of this % contribution. If you do not have PAYE deducted, you can choose any amount to contribute to KiwiSaver. The ‘optimum’ contribution to KiwiSaver is $87 a month, which is the maximum level that the Member Tax Credits are matched to. You can make regular or lump sum contributions to your KiwiSaver account.