For Employees
KiwiSaver is a savings framework introduced on 1 July 2007. It's voluntary for employees to join, but employers are required to support KiwiSaver for their staff. The Government has built attractive subsidies into KiwiSaver, including a $1,000 kick start contribution, tax credits of up to $1,040 per year, and matching employer contributions. This website explains the overall structure of KiwiSaver, including how it will affect you as an employee and how these benefits work.
How do I join KiwiSaver?
There are two ways to join KiwiSaver – via automatic enrolment or by opting in.
Automatic Enrolment
If you are aged between 18 and 65 and start a new job you will be automatically enrolled in KiwiSaver. There are some exceptions – the flow chart below shows whether automatic enrolment applies. If it does, your employer needs to provide you with an information pack which will be produced by Inland Revenue. If your employer has chosen a preferred KiwiSaver scheme for their staff, such as the Grosvenor KiwiSaver Scheme, an Investment Statement for this scheme also needs to be provided.
Your employer will start deducting KiwiSaver contributions from your first pay. If you don’t want to join KiwiSaver, you can “opt out” between the end of week two and the end of week eight after beginning employment. If you opt out all of your KiwiSaver contributions will be refunded.
Q. Does automatic enrolment apply if I am working part time?
A. The KiwiSaver rules make no distinction between part-time and full-time employees. If you take on a new part time job you will be subject to automatic enrolment if you meet the other automatic enrolment criteria.
Q. How do the automatic enrolment rules apply if I am a casual or temporary employee?
A. Employees whose contract does not exceed 28 days of continuous service are not subject to automatic enrolment. Casual employees who do end up working more than 28 days are subject to automatic enrolment on day 29.
Opting in
If you are an existing employee you can join KiwiSaver any time. To opt in you can either give your employer a KS2 form, which is part of the IRD information pack, or sign up using an application form in the Grosvenor KiwiSaver Scheme Investment Statement. If you opt in to KiwiSaver you cannot subsequently opt out.
Q. Can I join KiwiSaver if I am under 18?
A. People aged under 18 can join KiwiSaver but only by contacting a scheme provider directly. They are not subject to automatic enrolment.
Q. Can I join KiwiSaver if I am over 65?
A. People aged over 65 are not eligible to join KiwiSaver. However, existing members are free to remain in KiwiSaver and continue to contribute after they turn 65.
Q. If I change jobs can I opt out of the new job?
A. If you are a KiwiSaver member and have passed the initial opt-out timeframe, you will not have any further opportunities to opt out. Contributions will be deducted from any new jobs you take on unless you take a contributions holiday.
Q. Can Trusts join KiwiSaver?
A. Only “natural persons” can join KiwiSaver, so Trusts cannot.
Where is my money invested?
Under KiwiSaver, the government doesn’t manage your money. Funds are invested in private saving schemes which are run according to the KiwiSaver rules - such as the Grosvenor KiwiSaver Scheme. You can choose which scheme to join. Your employer may also nominate a scheme for their employees who do not make a choice of their own. If your employer doesn’t make a choice and you join KiwiSaver but do not choose a scheme yourself, you will be randomly allocated to a scheme by Inland Revenue.
You are free to change schemes at any time. If you sign up to a new scheme the funds in your old scheme will be automatically transferred, to ensure that you are a member of only one KiwiSaver scheme at a time.
Q. Can I join KiwiSaver and continue to save through my existing superannuation scheme?
A. Yes – while it is only possible to be a member of one KiwiSaver scheme at a time you can continue to be a member of, and contribute to, other superannuation schemes.
Q. How does Inland Revenue know which scheme I am in?
A. Inland Revenue will have a record of which default or employer-preferred schemes members are allocated to. If you join a different scheme of your choice your scheme provider will tell Inland Revenue.
What kind of investments are there?
The Grosvenor KiwiSaver Scheme has a range of different investment options to suit different people. Some people may wish to contribute to conservative investment options, which invest mainly in fixed interest investments and earn relatively stable returns. Others may wish to aim for higher returns and take more risk in the process. The answer for each individual depends on their particular situation. Appropriate advice is important in making the right choice.
To find out more about the options within the Grosvenor KiwiSaver Scheme, click on "Grosvenor Funds" or "Fees and Returns" to the left.
Employees who are randomly allocated to a default KiwiSaver scheme will have their contributions invested in a low-risk investment option with returns similar to bank term deposits. This may not be the best result for many people, because shares have historically earned the highest returns over long time periods.
Q. Can my account balance fall in value?
A. The investment returns of your KiwiSaver account depend on the performance of the investment option you choose, although the Grosvenor scheme does have options suited for conservative investors. Appropriate financial advice is important if you are uncertain which investment option is most appropriate for you. Your nominated financial adviser can help you with this decision.
What contributions are made?
You can nominate a contribution rate of either 4% or 8% of gross salary and wages. (From 1 April 2009, a 2% rate will also be available.) While these are the standard rates, you and your employer are free to make any amount of voluntary contributions on top of the nominated rate. If you don’t choose a rate and are automatically enrolled in KiwiSaver then contributions are deducted at a 4% rate (2% from 1 April 2009).
Note that “salary or wages” includes any bonuses, commissions, gratuities, overtime or other remuneration paid through the PAYE system but does not include redundancy payments, or overseas living costs paid by your employer.
Your employer pays your contributions to Inland Revenue. Once contributions have begun, Inland Revenue will hold them for the first three months before forwarding them to your KiwiSaver scheme. After three months Inland Revenue will regularly pass contributions to your scheme provider once receiving them from your employer.
After one year in KiwiSaver, you can stop contributing by applying to Inland Revenue for a contributions holiday. Contributions holidays can run from three months to five years in length – it’s up to you. It’s possible to apply for a contributions holiday before being in KiwiSaver for a year, however in this case the holiday will only be granted on the grounds of financial hardship.
You can transfer in money from another superannuation scheme. Other people can also make contributions to your KiwiSaver scheme on your behalf.
Q. Can I change my contribution rate after joining KiwiSaver?
A. You can change your contribution rate by giving notice to your employer in writing or on a KS2 form. Changes cannot be made at intervals of less than three months, unless your employer agrees.
Q. Are my contributions made from gross income or post-tax income?
A. Contributions from employees are made from post-tax income, although the contribution rate (4% or 8%, or 2% from 1 April 2009) is applied to their gross salary.
Q. Can I make lump sum contributions to KiwiSaver?
A. You can make lump sum contributions at any time. You can contribute directly to the Grosvenor scheme by selecting Grosvenor as a bill payee on your internet banking. If you wish, you can also make additional regular contributions via direct debit.
Alternatively, you can make voluntary contributions via Inland Revenue using one of these methods:
1. Using the “Pay tax” option on your bank’s internet banking facility
2. Paying over the counter at a Westpac bank branch.
3. Sending IRD a cheque. You'll need to make the cheque out to Inland Revenue. On the back of the cheque, write your IRD number and "KSS" to indicate a voluntary member contribution. Send your cheque to:
Inland Revenue
PO Box 1535
Waikato Mail Centre
Hamilton 3240
Q. What if I am going on holiday?
A. If you take a trip overseas or within New Zealand, but are still paid by your New Zealand employer, KiwiSaver contributions will continue unless you take a contributions holiday. Alternatively, if you stop receiving salary or wages from your NZ employer, any contributions deducted from salary will stop automatically.
Q. What if I am on ACC?
A. If you receive regular compensation from ACC you can choose whether or not to have contributions deducted from their payments.
Q. What if I am a beneficiary?
A. If you are on an income-tested benefit you will not have contributions deducted from these payments. However, voluntary contributions can be made if desired.
Q. What if I am on parental leave?
A. If you continue to receive a salary while on parental leave, KiwiSaver contributions will continue to be deducted from your pay unless you take a contributions holiday. If no salary is being paid while on parental leave, contributions will stop automatically and restart when you return to work.
Q. What if I have more than one job?
A. If you have more than one job, when you join KiwiSaver you can choose which of your jobs to contribute from. You must contribute from at least one of your jobs. However, if you start a new job after joining KiwiSaver you’ll have to notify your new employer that you are a KiwiSaver member and make contributions from this new job. After 12 months you can suspend contributions for any of your jobs by taking a contributions holiday.
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Does my employer contribute as well?
From 1 April 2009, you will be entitled to a matching employer contribution of 2% of salary and wages. To be eligible for the matching contributions, you must be aged 18 or over and not yet be eligible to withdraw from KiwiSaver.
You’ll benefit further by receiving employer contributions free of tax. Normally employer contributions to a superannuation scheme are taxed at up to 33%. Until 1 April 2009 this tax has been waived for employer contributions to KiwiSaver of up to 4% of salary, provided the employee contributes at least as much themselves. From 1 April 2009 the tax free amount will be reduced to 2% of salary. Nevertheless, this tax break can add a large amount to your savings over time.
Q. Can my employer contribute more to my KiwiSaver accounts than the compulsory matching amounts?
A. Your employer can make additional contributions to your account if they wish, in accordance with your pay package. If they are a Participating Employer in the Grosvenor KiwiSaver Scheme, the Supplement in your Investment Statement will detail any additional contributions arranged between your employer and the Trustee of the scheme.
When can I withdraw my funds?
All contributions to KiwiSaver are locked in until the age of entitlement to New Zealand Super (65). There is also a five year minimum membership period, so a 64-year-old who joins KiwiSaver will have their contributions locked in until they are 69.
Early withdrawals are possible in the case of financial hardship, serious illness or permanent emigration. After three years, funds can also be withdrawn to put towards a first home purchase. Together with the first home deposit subsidy offered for KiwiSaver members by Housing New Zealand, this makes KiwiSaver a great way for prospective first home buyers to save.
|
Withdrawal type |
What funds can be withdrawn |
|
Retirement |
Your total account balance |
|
First home purchase |
All member and employer contributions, and all earnings, but not the $1,000 kick start or member tax credits of up to $20/week |
|
Financial Hardship |
An amount necessary to alleviate the hardship, but only out of member or employer contributions and earnings |
|
Serious illness |
Up to your total account balance |
Q. What happens if I die?
A. In the event of the death of a KiwiSaver member, their account balance becomes part of their estate.
Q. What happens if I declare bankruptcy?
A. If you are declared bankrupt your Official Assignee may recover your contributions under some circumstances.
Why join KiwiSaver?
KiwiSaver is an easy way to save, with contributions being deducted directly from salary. The significant benefits that the Government has put in place for KiwiSaver members can make saving through KiwiSaver very worthwhile.
• A $1,000 kick start contribution will be credited to each member’s account when it is opened.
• The Government will match member contributions via a tax credit of up to $20 per week ($1,040 per year). These will be paid directly into your KiwiSaver account after the end of each year.
• Matching employer contributions at 2% of salary from 2009
• Employer contributions can be received tax free by the employee up to 2% of salary from 1 April 2009. The tax exemption can significantly boost savings over time.
• Housing NZ will offer a first home buyer’s subsidy up to $5,000 to KiwiSaver members, based on $1,000 for each year of membership. The subsidy will be offered to members who have been saving through KiwiSaver for three years, subject to a cap on income and house price levels. More details on this subsidy and eligibility criteria can be found on the Housing NZ website: http://www.hnzc.co.nz
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Are you entitled to a KiwiSaver member tax credit?
What is the member tax credit?
If you are a member of KiwiSaver or a complying fund, the Government matches your contributions, up to a maximum of about $20 a week. The government contribution is your “member tax credit” (MTC).
MTC is calculated on your own contributions, and any voluntary contributions you’ve made. It excludes employer contributions, any contributions diverted to your mortgage and the $1,000 kickstart from the Government.
The MTC is paid annually and the year runs from 1 July to 30 June. Sometime after 30 June each year, your scheme provider claims your MTC from Inland Revenue, and adds it, generally in a lump sum, to your scheme account.
What do you need to do now?
Nothing! If you’re entitled to the MTC, it will be paid automatically by Inland Revenue to your scheme provider who will add it to your scheme account.
How much can the MTC be?
Your MTC will equal the total contributions you make over the year, up to a maximum of $1,042.86, depending on your start date with KiwiSaver and how much you have contributed.
When is your start date?
How and when you join your scheme is important, because the amount of your MTC depends on your start date (as well as how much you have contributed). You get a full entitlement if you’re a member for the whole year, and a partial entitlement if you’re a member for part of the year.
|
Your start date is |
|
If you joined through your employer: |
• The first of the month in which your first deduction was made from your pay; or
• The first of the month in which your first contribution was received by Inland Revenue,
whichever is the earlier. |
|
If you joined directly with a provider: |
• The date your provider opened your account, or
• The first day of the month that your employer deducted your first contribution; or
• The first day of the month that Inland Revenue or your scheme provider received your first contribution,
whichever is the earlier. |
Examples
• Tony is a self-employed panelbeater. In April 2008 he decided to join KiwiSaver. His provider opened his account on 25 April and Tony made an initial payment on 13 May. Tony’s start date is 25 April.
• Anna, an employee working for the ABC company, wanted to join KiwiSaver. She decided to join XYZ Investments and filled out the forms via her employer on 26 February 2008. Anna’s employer deducted her first contribution on 17 May. Inland Revenue received the payment on 20 June. Anna’s start date is 1 May
.
How is the MTC calculated?
Your MTC will be calculated by Inland Revenue, depending on when you became a KiwiSaver member, and how much you have contributed.
In the following two examples, both people joined KiwiSaver as soon as it started, so their MTC is calculated on a full year.
Examples
• Jake is an apprentice earning a wage of $22,000 a year. He joined as soon as KiwiSaver started. Over the year, he contributed $880 to his KiwiSaver scheme. His MTC will be $880.
• George is a self-employed panelbeater. His annual contributions totalled $3,120, so he will get the maximum MTC of $1,042.86.
Your entitlement to the MTC is proportional to your time in the scheme, so if you join KiwiSaver part way through the year, you will only be entitled to a part of the MTC.
Example
• Lisa, the financial controller in a large collision repair company, joined KiwiSaver in January 2008. Her contributions from January to June came to $1,700. Lisa’s MTC will reflect that she has been a member for half of the 12-month period. Her MTC will be $521.43 (half of $1,042.86).
Employees, please note that only your contributions count towards your MTC entitlement. Your employer’s contributions aren’t included in the calculations.
Also, if you choose to contribute to KiwiSaver at a 2% rate after 1 April 2009, and you earn under $52,000 per year, the deductions from your pay will not be enough for you to receive the maximum MTC amount of $1,042.86.
When will your MTC start working for you?
It depends when your KiwiSaver scheme provider submits the claim to Inland Revenue – sometime after 30 June 2008, and when it is credited by them to your account. Your MTC should appear on a statement issued by your provider or you may be able to check it on-line with your provider. If you’re an employee and Inland Revenue hasn’t received all your contributions for the year when your provider claims the credit, the balance will be paid later.
Please note the MTC isn’t paid in cash. It is always credited to your KiwiSaver scheme. MTC payments to your scheme are considered “excluded income” for tax purposes, although you will be liable for tax on income you make from the MTC though (i.e. investment earnings etc), and this is paid by your provider so you don’t have to include it in your tax return.
What about under-18s?
The MTC is not available to members who are under 18 years old. If you turn 18 during the year, you’ll get an MTC for the portion of the year that you’re 18.
Do I stop receiving the tax credit when I turn 65?
Not if you have been in KiwiSaver for less than five years. Eligibility continues until you are able to withdraw from KiwiSaver, which will be age 69 for someone who signs up when they are 64. (The same principle applies to compulsory employer matching contributions.
Are there other eligibility criteria?
People who don’t primarily reside in New Zealand are not eligible for the MTC, unless they are working overseas for an approved charitable organisation for a token wage, or for the NZ Government.
What happens if I use Mortgage Diversion?
No member tax credit will be payable in respect of any contributions that are diverted. However if you still have contributions of more than $20/week after taking this into account, you’ll continue to receive the maximum tax credit amount.
You could be significantly better off saving through KiwiSaver, compared to saving outside of KiwiSaver.
The table shows the value of each of the KiwiSaver benefits for a member on $40,000 per year saving 4% of salary. With savings set aside for retirement, the benefits grow with compound earnings over time to add hugely to retirement savings. The figures shown include investment earnings over 35 years.
|
Benefit |
Value after 35 years* |
|
Saving through
KiwiSaver |
Saving outside
KiwiSaver |
|
Contributions at 4% of salary |
$227,448 |
$227,448 |
|
$1,000 kick-start contribution |
$7,686 |
0 |
|
Government matching of
contributions (up to $20 per week) |
$115,892 |
0 |
|
Employer matching of contributions |
$76,195 |
0 |
|
Tax saving on employer contributions |
$37,529 |
0 |
|
|
|
|
|
Total savings for retirement |
$464,750 |
$227,448 |
*Assumes savings earn 6% pa after fees and tax and contributions grow with inflation at 2% pa.
Your adviser can help you make the most of KiwiSaver, and help you with any queries you may have. Looking for an adviser in your area? We can suggest one for you.
To order a copy of our investment statement and have an accredited adviser answer your queries, please click here
Other useful sources of information are:
Source: Inland Revenue | 
