KiwiSaver is a voluntary, savings initiative to help you with your long term saving for retirement.  It is designed to be hassle-free, so it is easy to maintain a regular savings pattern.

When you join a KiwiSaver scheme you will receive:

• A 3% contribution from your employer.
  If you’re contributing to KiwiSaver from your salary or wages, your employer is required to put in a minimum of 3% of your Before Tax Pay (less employer superannuation contribution tax).
• Government Contributions of up to $521.43 every year.
  If you’re eligible, for every $1 you put into your KiwiSaver scheme account, the Government will put in 50 cents up to a maximum of $521.43 per year, if you’re 18 or over. To get the maximum amount you’ll need to contribute $1,042.86 per year. This is called a Government Contribution.
• Did you know: Last year 620,000 members missed out on the Government Contribution.*

* “Time to claim your government contribution” www.cffc.org.nz 02.05.19 A reflection of the number of members not contributing to their account or on a savings suspension.

• First home withdrawal.
  If you’ve never owned a home, and you’ve been a KiwiSaver member for at least three years, you can take out all of the money both you and your employer have put in, as well as all of the investment returns, to help buy your first home. (except for $1,000 and any amount you may have transferred from an Australian complying superannuation scheme) **
• Up to $10,000 HomeStart grant.
  On top of the first home withdrawal, if you’re eligible, you may also receive up to $10,000 as a HomeStart grant from the Government towards your first home.**

** Conditions apply. For more information visit the Housing New Zealand website at https://kaingaora.govt.nz/ for conditions.

• Your money is held in trust.
  Whether you are with a big Aussie bank or a New Zealand owned KiwiSaver specialist, the KiwiSaver Act requires your investments to be held by a licensed trustee and not the scheme provider. This means you can focus on selecting the fund that’s right for you knowing your investments are being held and supervised by an independent trustee.

• What you will get when you retire

NZ Super provides for a basic standard of living in retirement, but it may not be enough for the kind of retirement you want. Having a KiwiSaver account does not affect your eligibility for NZ Super or reduce the amount of NZ Super you would be eligible for. KiwiSaver savings will complement NZ Super to provide you with a better standard of living for your retirement.

How do you make contributions?

For many people, KiwiSaver will be work-based. This means you will receive information about KiwiSaver from your employer, and your KiwiSaver contributions will come straight out of your pay.

• Employed 

Your KiwiSaver contributions are automatically deducted from your PAYE and paid to your KiwiSaver account. Only your employee or voluntary contributions count towards the $1,042.86. Any employer contributions, government or tax contributions or Aussie Super transfers are not included.

If you are not earning enough to contribute the full $1,042.86 (approx 3% of a $35,000 salary each year) you can make direct contributions to your KiwiSaver account to get your full Government Contribution.

• Your employer must match your contributions up to 3% of your salary or wages.

If you are over 18 and contributing to KiwiSaver from your salary or wages, your employer is required to put in a minimum of 3% of your Before Tax Pay (less employer’s superannuation contribution tax).

You can choose to contribute 3%, 4%, 6%, 8% or 10%, however, your employer is still only required to contribute 3%.

The exception to this is if you are on a “Total Remuneration Package”. This allows an employer to set a fixed remuneration amount for each employee. If the employee joins KiwiSaver, the cost of the employer contribution comes out of the employee’s pay.

• Self-employed, not employed or on a savings suspension

You can contribute directly to the Scheme. Any contributions made to your KiwiSaver account will count towards the $1,042.86.

If you have a partner or spouse who is in KiwiSaver and not working (ie maternity leave) you may want to think about contributing to their KiwiSaver account before 30 June so they qualify for their $521.43. Don’t forget any children (who are over 18), as building up their KiwiSaver can be a great way for them to save for their first home.

Assumptions

• Each investor remains employed at all times until their retirement age of 65.
• No withdrawals are made.
• Their salaries grow by 3% per annum and they earn a 6% per annum return after tax and fees.
• Inflation is assumed to average 2% per annum.
• The investors and their employers each contribute 3% of the investor’s before tax pay into the investor’s KiwiSaver account.
• The employer‘s contributions are net of employer’s superannuation contribution tax at current rates.

Disclaimer: The illustrations above do not reflect the prospective performance of the Scheme or of any fund. Returns to members of the Scheme are subject to investment and other risks (including potential losses). No returns are guaranteed or assured, and returns can at times be negative, particularly given the length of the investment period shown in the illustration. Past performance is not necessarily an indicator of future performance and returns over different periods may differ.

KiwiSaver fees and taxes

Compare returns after fees and not just fees.

We strongly recommend you compare returns after fees rather than the fees of different KiwiSaver schemes. Why? Because a comparison of just fees will only give you part of the story. As Warren Buffet says ‘Price is what you pay, value is what you get.’ If you compare net returns after fees you will be comparing what you actually receive as an investor.

Focus on ‘after fee and tax outcomes’ more important than pure fees – SuperRatings

Funds research firm SuperRatings recognises that whilst fees are an important factor in assessing the competitiveness of a scheme, studies have shown that “there is often an inverse relationship between fees and investment outcomes achieved by members, as those funds with the lowest fees will often provide lower investment returns than their higher fee counterparts”. SuperRatings CEO, Adam Gee, confirmed “We remain highly concerned with the continual focus on fees by many participants within the KiwiSaver market. As is evident from our modelling, whilst fee savings will deliver some benefit to members, the associated reduction in potential investment earnings is often four to five times the level of fees saved”. (SuperRatings Media Release 22.11.16)

What taxes will you pay?

KiwiSaver Schemes are portfolio investment entities. The amount of tax you pay is based on your prescribed investor rate (PIR). Your PIR rate is either 10.5%, 17.5% or 28% based on your income over the last 2 years.

Did you know: If you are paying too much tax you are not eligible for a refund. However, if you are paying too little tax you are liable to pay additional tax to the IRD (together with any interest and penalties).

KiwiSaver schemes are managed by private sector companies called KiwiSaver providers. You can choose which KiwiSaver provider to invest your money with. KiwiSaver is not guaranteed by the Government. This means you make your investment choices in a KiwiSaver scheme at your own risk.

To make informed decisions about your Kiwisaver contact us before you make any decisions on provider or fund choices to discuss your options.