Most people look forward to their retirement years, with plans of spending time with friends and loved ones, daily rounds of golf or even holidays around the world. But without any savings, these dreams are just simply not going to happen and you’ll be left living week to week on a small budget.
Saving from an early age means that you’ll have less financial stress when it comes to thinking about retiring, and you’ll be able to enjoy all those things you didn’t have time for in your working years. Thanks to KiwiSaver, Kiwis are able to save $600 a month on average through regular contributions and the return on their investment with various providers and schemes.
KiwiSaver is a work-based savings initiative that takes contributions from your own pay cheque, as well as from your employer and the government, and invests them in conservative to high-risk growth funds. It’s a voluntary scheme that you can start at any time to save for your retirement, and you can decide the contribution percentage you’d like to make. You can choose the KiwiSaver provider you want to invest your savings with, or the Inland Revenue Department (IRD) can assign you to one of the default schemes. You will be able to access your savings when you reach the NZ Super age, which currently sits at 65.
As well as saving for your retirement, you can put most of your KiwiSaver savings toward purchasing your first home as long as you have been making contributions to your account for at least three years. You can also take advantage of the KiwiSaver HomeStart Grant, where the government gives eligible New Zealanders up to $10,000 for buying a new home or land.
Even though the government contributes to your KiwiSaver account, it does not guarantee KiwiSaver and its returns, so your investment is at your own risk.
There are three pathways to join KiwiSaver as a regular employee as well as special rules for trusts and partnerships.
Special rules apply if you are a working partner of a partnership or if you have a trust-run business. You can join KiwiSaver by giving your payroll a KiwiSaver deduction form or contacting a KiwiSaver provider directly.Things to keep in mind
There are a number of KiwiSaver providers that can manage your savings in a scheme. You can choose your own provider after conducting your own research or getting financial advice, or the IRD can allocate you to one of the nine government-appointment providers. Your employer may have their own preferred KiwiSaver scheme that you will be allocated to, but it’s possible to switch to one that you would like at any time.
If you would like to do your own research as to what the schemes offer, you can go to the Disclose Register for more information.
Once you have enrolled in KiwiSaver, you will need to contribute for at least 12 months before you can take a break. If your employer has automatically enrolled you in the initiative, you can opt out at any time between two and eight weeks of starting your new job.
You can choose to contribute 3%, 4%, 6%, 8% or 10% of your gross salary or wage. Your employer needs to contribute at least 3%, and the government puts in its own contribution of up to $521 a year as well. Self-employed and unemployed people do not need to contribute a set amount and can set up a direct debit or make lump-sum payments.
Funds are invested into a scheme of your choice, where investment returns can go up or down over time depending on how that fund is performing.
Your savings total will include contributions made by yourself, your employer and the government, minus any taxes or fees balanced with investment returns.
You have the option to change your provider whenever you want to, but you are only able to have one scheme at any time.
Before committing to KiwiSaver, it’s important to understand the benefits that this savings scheme has to offer so you can ensure that it’s the right choice for you.
Once you have opted in to KiwiSaver, whether that’s through your employer or directly with a provider, there is not a lot that you need to do to manage your account, but here are some things you need to know.
With many different investment funds available, there is a chance that your money could be invested in something you deem unethical, such as nuclear power, weapons, gambling or alcohol. Thankfully, there are a number of providers that have processes in place to ensure these kinds of investments are filtered out, so they only offer ethical opportunities.
If you are looking for an ethical provider for your KiwiSaver scheme, there are a number of options to choose from. These include AMP, ANZ, ASB, BNZ, Booster, Fisher Funds, Fisher Funds TWO, Generate, Kiwi Wealth, Lifestages, Mercer, Milford, Nikko AM, NZ Funds, QuayStreet, Simplicity, Summer and Westpac.
