The KiwiSaver option for employees

What is KiwiSaver?

KiwiSaver is a voluntary savings scheme launched in July 2007.  Its operation is based around employers deducting money from employees’ wages as retirement savings. 

From 1 July 2007, employees aged 18-65 years are automatically enrolled in KiwiSaver when they start a new job (existing employees can opt-in if they wish)

How does it work?

As an employee you can currently contribute either 2%, 4% or 8% of your gross pay * – you decide.  Deductions start from the first pay and are deducted with PAYE and paid to IRD.  IRD then passes the money to a private company (called a provider) to invest:

• employees can select their own provider from those who hold registered KiwiSaver schemes
• and / or employers can choose a provider for their employees
• if neither the employee nor the employer selects a provider, the IRD assigns one of the six providers listed on a panel of default providers

* Note: it is proposed to increase the minimum employee contribution rate from 2% to 3% of gross salary or wages from 1 April 2013.

How do I join

If you are a new employee, you can opt out of KiwiSaver between weeks two and eight of your new job.  If you've been an employee of your company since before KiwiSaver was launched, then you can enroll through your HR department.

What do I receive?

When you initially join KiwiSaver, you get:

• a government kick-start of $1,000
• a member tax credit matching the contributions you've made that year by 50c for each dollar contributed, up to a maximum of $521.43, paid by the Goverment, pro rata if you join partway through the membership year (1 July - 30 June)
• in most cases employers must match your contribution up to 2% of your pay if you are contributing to a KiwiSaver scheme *

* Note: it is proposed to increase the minimum employer contribution rate from 2% to 3% of gross salary or wages from 1 April 2013.

What do I need to know?

• funds (including the Government kick-start of $1,000) can only be accessed at the age of eligibility for New Zealand Superannuation (currently 65) or five years after the first contribution, whichever happens last.  Note: access to funds are permitted in special circumstances – for significant financial hardship, permanent emigration or serious illness
• after a minimum of three years of KiwiSaver membership, savers can withdraw their contributions to buy their first home (excluding the kick-start) under the first home deposit subsidy. The Government will also contribute $1000 for every year of saving, up to $5000. Savers must meet certain criteria to be eligible
• savers can take a contributions holiday for up to five years after they have contributed to KiwiSaver for 12 months