Understanding KiwiSaver: Plan your retirement today - Kalkine Media

KiwiSaver is a voluntary savings initiative launched by the New Zealand government in 2007 to help New Zealanders save for their retirement. KiwiSaver is designed to provide financial support to those who need it most in retirement and to encourage people to start thinking about their retirement savings early on in their careers. In this article, we will explore what KiwiSaver is, how it works, and the key benefits it offers.

What is KiwiSaver?

KiwiSaver is a savings scheme that allows you to save for your retirement while you are working. It is open to all New Zealand citizens, permanent residents, and eligible workers. Children under the age of 18 can also enter the scheme, but require parental consent to join. The scheme is administered by the Inland Revenue Department (IRD) and is overseen by the Financial Markets Authority (FMA).

KiwiSaver is available through various scheme providers, who will invest your savings on your behalf. If a provider is not selected, a fitting one will be assigned by the Inland Revenue Department.

How does KiwiSaver work?

When you join KiwiSaver, you will be allocated a unique identification number that will stay with you throughout your life. You will also have the option to choose a provider from a range of approved KiwiSaver providers. These providers are companies that manage KiwiSaver funds on behalf of their clients. Once you have chosen a provider, you can then decide how much money you want to contribute to your KiwiSaver account each payday. You can also make additional voluntary contributions at any time.

Your employer is required by law to make a minimum contribution of 3% of your gross salary or wages into your KiwiSaver account. You can choose to contribute more than this amount if you wish, up to a maximum of 10% of your gross salary or wages. The government also provides an annual member tax credit of up to AU$521.43 per year to help boost your savings. The amount of the tax credit you receive depends on the amount you contribute to your KiwiSaver account each year.

Your KiwiSaver account is invested in a range of assets, including cash, fixed interest, shares, and property. The type of assets your money is invested in will depend on the fund you have chosen and your risk profile. KiwiSaver providers offer a range of funds with different levels of risk and return to suit different investment goals and risk appetites.

Looking for a trusted provider? Manage KiwiSaver with Milford, a specialist investment company. You can join or switch to Milford’s KiwiSaver Plan in less than 5 minutes!

What are the key benefits of KiwiSaver?

KiwiSaver is more than a simple savings account - your scheme provider will actively invest your savings, earning you returns from all of your contributions, whether through employer contributions, government contributions, or any additional funds you divide to contribute voluntarily. Let’s take a closer look at KiwiSaver’s key benefits:

Save for your retirement

The primary benefit of KiwiSaver is that it provides a simple and effective way to save for your retirement. By contributing regularly to your KiwiSaver account, you can build up a substantial nest egg that will provide you with a comfortable lifestyle in retirement.

You can also use your KiwiSaver funds to pay for your first home - a one-off withdrawal of your funds can be performed after you’ve been a member of a KiwiSaver scheme for at least 3 years. When combined with the First Home Grant made available by the government, it can be a great help for young adults looking to find affordable living on their own.

Employer contributions

When you contribute to KiwiSaver, your employer is required to match your contributions up to a certain percentage. This means that you are effectively doubling your savings each payday, which can help you reach your retirement goals more quickly. Employers are required to contribute at least 3% of their employees’ gross salary or wage to KiwiSaver, on top of the salary and any bonuses.

Tax credits

As mentioned earlier, the government provides an annual member tax credit of up to AU$521.43 per year to eligible KiwiSaver members. This is a great way to boost your savings and can make a significant difference to your retirement savings over time.

Access to your savings

While KiwiSaver is primarily designed as a retirement savings scheme, you may be able to access your savings early in certain circumstances, such as purchasing your first home or in cases of significant financial hardship.

Flexibility

KiwiSaver is a flexible scheme that allows you to change your contribution rate or your KiwiSaver provider at any time. This means that you can adjust your savings strategy to suit your changing circumstances or investment goals.

Conclusion

KiwiSaver is a savings initiative that provides a simple and effective way for New Zealanders to save for their retirement. By contributing regularly to your KiwiSaver account, you can build up a substantial nest egg that will provide you with a comfortable lifestyle in retirement.

It is important to choose a fund that matches your risk profile and investment goals, and to regularly review and adjust your strategy as needed. KiwiSaver is a valuable tool for achieving your retirement savings goals, and all New Zealanders should consider taking advantage of this savings initiative to secure their financial future.