How much you need to contribute to your KiwiSaver account depends on a few factors.
Firstly, you need to access whether you are an employee, non-employee, self-employed, or caregiver. If you are an employee, you can choose to invest 3%, 4%, or 8% of your earnings. The minimum amount is 3% of your before tax total, collected through the PAYE tax system. You are able to change the percentage you are saving whenever you choose.
After a year you can decide to increase the minimum 3% amount or take a contributions holiday, which means you can choose to stop saving a percentage of your wages for a time. Employees can also choose to contribute extra savings direct to the provider.
If you fall under any other category, you can become a KiwiSaver member, but there is no minimum contribution other than what your provider sets. You can choose to invest as much or as little as you desire. It is good to note that if you are 18 years or older, saving at least $87 a month, $1,042.86 a year, will entitle you to a yearly Government top-up of $521.43. Essentially, for every dollar you invest, the Government will contribute .50 cents, up to a maximum of $521.43 per calendar year. If you aren’t going to contribute at least $1,042.86 through your employee contributions, you can make voluntary contributions to ensure you get the member full tax credit payment. This amount can make a real difference over a short or long term period.
Talk to us about how best to manage your rate of investment, and what saving a few extra percent now could do for you in the future. We can also advise you on saving above and beyond the 8% amount, as well as whether the Superannuation or KiwiSaver scheme will be to your best advantage.
Once you are all set up in KiwiSaver and saving a minimum of 3%, your employer will contribute to your account. The default amount is equal to 3% of your pay. Employers are able to make additional voluntary contributions.
There are a few circumstances in which your employer may not be required to make compulsory payments, such as paying into a pre-existing eligible and registered superannuation scheme on your behalf (which must meet certain criteria). Also if you are under 18 years of age, if you are on leave without pay, taking a contributions holiday or are over 65.
An employer is required to provide new employees with information about KiwiSaver within the first week, including a KiwiSaver Information Pack and a product disclosure statement from the employer's scheme if the employee chooses not to pick their own scheme. Employers must also provide the IRD with certain information about the employee.
You can choose if you want to join KiwiSaver or opt out if you have been automatically enrolled. Automatic enrolment does not apply to temporary employment such as casual agricultural workers or contracts of service for 28 days or less. If employment in these circumstances continues beyond 28 days, automatic enrolment roles apply.
If you have any questions or concerns, or simply need help understanding any aspect of KiwiSaver, our specialists are here to unpack all the details in a clear and friendly way to bring you peace of mind and security.
KiwiSaver Member Tax Credit
The New Zealand Government will contribute to your KiwiSaver account yearly provided you are a contributing member over 18 years of age. This amount is deposited automatically if you contribute at least $1,042.86 to the scheme within the year. The maximum payment from the Government per year is $521.43 and is a great incentive to help you save. This ceases at age 65 or once a member for 5 years, whichever is the later.
KiwiSaver has been the most successful public private partnership in New Zealand’s recent history and has persuaded more than 1.7 million New Zealanders to commit to long term savings for retirement, well beyond the initial expectations of Government. (FSC, 2016).
Albert Einstein famously said, “compound interest is the eighth wonder of the world, those who understand this, earn it… those that don’t, pay it.” The simple truth of compounding returns is the most important thing that matters for the long-term investor. Yet in today’s world we are consistently bombarded with distractions, become pre-occupied with other things, and we forget this simple truth.