Perhaps you've heard of KiwiSaver or — maybe not. But if you're an NZ citizen or entitled to live here and have signed a work contract, you'll likely have run across it already.
KiwiSaver is a voluntary scheme set up by the government to help you save for a house or retirement. Employers usually set it up when you sign your contract because they also have to contribute. Essentially this means they're paying you more on top of your agreement — it's just money you won't see until you either purchase a home or retire.
Meanwhile, you can choose to set aside 3-10% of your wages before tax, with your employer matching 3% as well from their pocket. The government also contributes 50¢ to every $1 you save — up to $521.43.
What do I have to do?
Your KiwiSaver is as involved as you want it to be. This means you can either sign on and forget about it or take an active interest in the amount you save. Because, unlike interest, your KiwiSaver changes value depending on your provider.
There are only three ways to get involved in KiwiSaver – contact a provider, contact your employer or sign an employment contract to get automatically enrolled. A provider is usually a bank or investment firm authorised to act on your behalf. They'll likely give you what's called a KS9 form, which includes everything you need to get started with your KiwiSaver. You can hop online to find all this information available on the IRD's website.
If you're unsure whether you've got a KiwiSaver already, ask your employer for a copy of your contract. Payment slips also include your KiwiSaver details if you're curious about the rate you're currently on.
Your contract should cover all the details of your KiwiSaver, including your rate of contribution. You're free to change your rate every three months or set the figure beyond the maximum. Make sure to let your employer know if they're the ones paying into your KiwiSaver.
You can also talk to your employer about changing service providers on your KiwiSaver' scheme'. A 'scheme' is just a fancy word for the type of 'fund' you want to set up (and 'funds' are anything you set aside for a particular savings purpose, like retirement or a house). Most likely, your employer automatically set you up on a default scheme when you signed your contract.
But your scheme can be changed at any time, by letting your employer know. However, if you do decide to switch, some transfer fees may apply. It's a good idea to speak to your new provider before you go ahead and make the change.
What if I don't have an employer?
If you're currently unemployed, working freelance, or on a contract, you may need to set up KiwiSaver yourself. To get the ball rolling, try contacting a service provider. You can view a complete list of available providers on the IRD's website.
It's important to research which provider suits you because providers offer different approaches to KiwiSaver fund schemes, from high to low risk. What this means is they'll either chase high return rates, with the chance they'll drop, or set you on a more balanced savings pace. There are five 'types' to look out for, including;
Check your provider's website for these keywords – they change your savings rate. Also, feel free to check out our other blog on 'financial risk' and why going 'high-risk long-term' might benefit you if you're beginning.
Paying for KiwiSaver.
Depending on what suits you, you can set up an account to pay your KiwiSaver through either your provider or IRD. If you're working your own business, you may choose the 'Pay tax' option and select 'KiwiSaver' online. If you're worried about keeping up with your contributions, try setting up an automatic payment system. This works the same as if an employer were paying you each week out of what you earned.
For more information, check IRD for the form on KiwiSaver and self-employment. It covers all the same stuff like this blog, in more detail, including how to withdraw from your application should you need it.
If you're employed, you'll need to contact your employer directly to change how you manage your savings scheme. That includes if you're coming off self or other types of employment, where your employer isn't directly involved in your KiwiSaver. Doing this means you can have savings deducted from your pay, and you don't end up contributing twice — unless you want to.
KiwiSaver is a great way to get ahead and set aside some of your cash flow for those significant life events; retirement and house buying or buying a home.
So, make sure to check your contract with your employer, or start searching around online for a provider if you have an alternative work arrangement or are currently not working. The sooner you begin, the more you'll save in the long run.