Reference

KiwiSaver

Piggy bank

KiwiSaver is a government-initiated savings scheme designed to get New Zealanders saving for their retirement well before they reach retirement age. Most people in New Zealand retire at 65, although it is not compulsory. KiwiSaver came into effect on July 1, 2007.

Retirement savings schemes such as KiwiSaver give people who want better than minimum standard of living an option of saving money now for their retirement.

The 2007 Budget outlined employer contributions of four percent to each employee’s KiwiSaver account by the 2011-12 financial year.

People who do retire at 65 may be eligible for NZ Superannuation, an allowance aimed at providing a basic standard of living. NZ Superannuation, often called “super” or “the pension” is administered by the Ministry of Social Development. The Work and Incomer guide to NZ Superannuation lists eligibility, application and payment details.

While it is a government initiated savings scheme, KiwiSaver is run through providers who work with employers and individuals to offer a range of schemes – some aimed at a slow and steady approach to long-term financial security, others aimed at a higher rate of return.

If you are unsure of who to choose, the Government has named six default providers they intend to appoint for people who join KiwiSaver without nominating a preferred savings scheme. They are ASB, AMP, ING, Mercer, AXA and Tower.

The Gareth Morgan KiwiSaver web site lists the key features of KiwiSaver:

  • New employees are automatically enrolled in KiwiSaver by their employer and have up to 8 weeks to opt out.
  • Other employees and the self-employed can opt-in to KiwiSaver.
  • Money saved in KiwiSaver accounts is locked in until you are eligible to receive New Zealand superannuation (currently 65) or 5 years after you have joined a KiwiSaver scheme (whichever is the latest). Under certain circumstances (financial hardship, illness, first home purchase, emigration) you can withdraw money from your KiwiSaver scheme prior to these dates.
  • If you join a KiwiSaver scheme and you are an employee, you must contribute 4% or 8% of your gross salary or wages to the KiwiSaver scheme in respect to that employment. The Commissioner of Inland Revenue can grant a contributions holiday, which last for up to 5 years, upon receipt of your application for a contributions holiday.
  • You can choose your own KiwiSaver provider, and change your provider at anytime.
  • If you change employment your membership in a KiwiSaver scheme is not affected - your KiwiSaver account follows you wherever you are employed in New Zealand.
  • The Government will contribute a $1,000 kick start grant to all new KiwiSaver accounts.
  • The Government will also provide an ongoing annual fee subsidy of a fixed dollar amount.
  • The Government also intends to provide a first home deposit subsidy up to a maximum of $5,000 for qualifying individuals KiwiSavers.

There are a wide range of retirement and savings schemes available, some run by private organisations, such as insurance companies, and others by banks and investment fund managers. It is important to research the options – different schemes offer different returns, have different risks and different costs.

If you are interested in saving for your retirement, get independent financial advice. A good place to start is the NZ Retirement Commission’s web site. It has retirement calculators and a range of sophisticated financial planning tools.

We recommend: Retirement saving resources

Our online resources:

  • Get Advice – localeye listings for financial advisors in Christchurch and Canterbury
  • Retirement – localeye listings for organisations that help people of retirement age in Christchurch and Canterbury

Our Internet Gateway recommends:

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Last updated: 9 May 2008