Understanding KiwiSaver: A guide for New Zealanders

KiwiSaver is a voluntary, work-based savings initiative designed to help New Zealanders save for their retirement. Whether you're just starting your career or planning for the future, understanding KiwiSaver can help you make informed decisions about your financial wellbeing.
 

What is KiwiSaver?

KiwiSaver is a retirement savings scheme introduced by the New Zealand government in 2007. It aims to encourage long-term savings habits among New Zealanders by providing a structured and incentivized way to save for retirement.
 

How does KiwiSaver work?

1. Enrolment: You can join KiwiSaver through your employer or directly with a KiwiSaver provider. If you're employed, you may be automatically enrolled when you start a new job, but you have the option to opt-out within the first 8 weeks.

2. Contributions: Contributions to your KiwiSaver account can come from three sources:

• Employee contributions: You can choose to contribute 3%, 4%, 6%, 8%, or 10% of your gross salary or wages.
• Employer contributions: Your employer is generally required to contribute at least 3% of your gross salary or wages.
• Government contributions: The government contributes up to $521.43 annually if you contribute at least $1,042.86 per year.

3. Investment: Your contributions are invested in a KiwiSaver fund of your choice. These funds range from conservative to aggressive, depending on your risk tolerance and investment goals.

4. Withdrawals: You can withdraw your savings when you reach the age of 65. Early withdrawals are allowed under certain circumstances, such as buying your first home, significant financial hardship, or serious illness.
 

Benefits and considerations

Benefits:

• Government and employer contributions: Boost your savings with contributions from your employer and the government.
• First home withdrawal: Use your savings to help purchase your first home.
• Flexible contribution rates: Choose a contribution rate that suits your financial situation.

Things to consider:

• Limited access: Funds are generally locked in until retirement, with limited exceptions.
• Market risk: Like other investments, returns can fluctuate based on market performance.
• Fees: Management fees can vary between providers and impact your overall savings.

As of 31 March 2024, KiwiSaver has over 3.3 million members, with total assets exceeding $111 billion NZD¹. The scheme has seen significant growth since its inception, reflecting its importance in New Zealanders' retirement planning.

KiwiSaver can be a powerful tool to help secure your financial future. By understanding how it works and weighing the pros and cons, you can make informed decisions that align with your retirement goals. For more detailed information, visit the Inland Revenue and New Zealand Government websites.

^1. Financial Markets Authority, KiwiSaver Annual Report 2024,  https://www.fma.govt.nz/assets/Reports/KiwiSaver-Annual-Report-2024.pdf