For Employers
What is KiwiSaver?
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 employer and how these benefits work.
How do people join KiwiSaver?
There are two ways to join KiwiSaver – via automatic enrolment or by opting in.
Automatic Enrolment
Employees aged between 18 and 65 who start a new job are automatically enrolled in KiwiSaver. There are some exceptions – the flow chart below shows whether automatic enrolment applies. If it does, you need to provide the employee with an information pack supplied by Inland Revenue. If you have chosen a preferred KiwiSaver scheme for your staff (such as the Grosvenor scheme), you also need to provide an Investment Statement for this scheme.
Q. Does automatic enrolment apply to part time employees?
A. The KiwiSaver rules make no distinction between part-time and full-time employees. Part-time employees are subject to automatic enrolment provided they meet the other automatic enrolment criteria.
Q. How do the automatic enrolment rules apply to casual employees?
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.
Q. If an employee opts out, what happens to contributions that have been deducted from salary but not yet forwarded to Inland Revenue?
A. You can either refund these contributions directly to the employee or forward them to Inland Revenue who will handle the refund.
Opting in
Existing employees can join KiwiSaver any time. To opt in an employee can either give you a KS2 form, which is part of the IRD information pack, or sign up directly with a scheme provider. People who opt into KiwiSaver cannot subsequently opt out.
Q. Can people aged under 18 join KiwiSaver?
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 people aged over 65 join KiwiSaver?
A. People aged over 65 are not eligible to join KiwiSaver. However, existing members are free to remain in KiwiSaver and continue contributing after they turn 65.
Q. If an existing KiwiSaver member changes jobs do they have the opportunity to opt out of the new job?
A. Once someone is a KiwiSaver member and has passed the initial opt-out timeframe, they do not have any further opportunities to opt out. If they start a new job they must notify their new employer that they are a KiwiSaver member. Contributions are deducted from any new jobs they take on unless they take a contributions holiday.
Q. Can Trusts join KiwiSaver?
A. Only “natural persons” can join KiwiSaver, so Trusts cannot.
Under KiwiSaver, the government doesn’t manage members’ money. Funds are invested in private saving schemes, which are run according to the KiwiSaver rules. As an employer you are free to nominate a preferred scheme providerfor your staff, such as the Grosvenor KiwiSaver Scheme. If you don’t make a choice, your employees who join KiwiSaver but do not choose a scheme themselves will be randomly allocated to a scheme by Inland Revenue.
KiwiSaver members are free to change schemes at any time. If a member signs up to a new scheme the funds in their old scheme will be automatically transferred, to ensure that they are a member of only one KiwiSaver scheme at a time.
Q. Can people join KiwiSaver and continue to take save through existing superannuation schemes?
A. Yes – while it is only possible to be a member of one KiwiSaver scheme at a time members can continue to be part of, and contribute to, other superannuation schemes.
Q. How does Inland Revenue know which schemes people are in?
A. Inland Revenue will have a record of which default or employer-preferred schemes members are allocated to. If a member joins a different scheme of their choice the 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 members may wish to contribute to conservative investment options which invest mainly in fixed interest investments and earn relatively stable returns, while 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 to help people make the right choice.
The Grosvenor KiwiSaver Scheme has a range of investment options available to suit people with different attitudes and capacity for risk. To find out more, 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 historically shares have earned higher returns over long time periods.
Q. Can a member’s account balance fall in value?
A. The investment returns of an individual’s KiwiSaver account depend on the performance of the investment option they choose, although the Grosvenor scheme does have options suited to conservative investors. Appropriate financial advice is important in helping people make the right choice.
What contributions are made?
Employees 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, both the employee and you as their employer are free to make any amount of voluntary contributions on top of the nominated rate. If the employee doesn’t choose a rate and is automatically enrolled in KiwiSaver then contributions are deducted at a 4% rate (2% from 1 April 2009).
Contributions are paid to Inland Revenue with PAYE, using the employer’s monthly schedule. Once contributions have begun, Inland Revenue will hold them for the first three months before forwarding them to the appropriate KiwiSaver scheme. After three months Inland Revenue will regularly pass contributions to scheme providers as they are received.
After one year in KiwiSaver, employees 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 the employee. 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.
Q. Can an employee change their contribution rate once they have joined KiwiSaver?
A. Employees can change their contribution rate by giving notice to you as their employer, either in writing or on a KS2 form. Changes cannot be made at intervals of less than three months, unless you agree.
Q. Are employee contributions made from pre-tax 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 lump sum contributions be made?
A. Lump sum contributions can be made at any time. Members can contribute directly to the Grosvenor scheme by selecting Grosvenor as a bill payee on their internet banking. Additional regular contributions can also be made via direct debit.
Alternatively, members can make voluntary contributions via Inland Revenue using one of these methods:
1. Using the “Pay tax” option on their internet banking
2. Paying over the counter at a Westpac bank branch
3. Sending a cheque to Inland Revenue. The cheque should be made out to Inland Revenue. On the back of the cheque, the member should write their IRD number and "KSS" to indicate a voluntary member contribution. Send the cheque to:
Inland Revenue
PO Box 1535
Waikato Mail Centre
Hamilton 3240
Q. What if an employee is going on holiday?
A. If a KiwiSaver member takes a trip overseas or within New Zealand, but is still paid by their New Zealand employer, KiwiSaver contributions will continue unless they take a contributions holiday. Alternatively, if they stop receiving salary or wages from their NZ employer, any KiwiSaver contributions deducted from salary will stop automatically.
Q. What if an employee is on ACC?
A. KiwiSaver members who receive regular compensation directly from ACC can choose whether or not to have contributions deducted from their payments.
Q. What if an employee is receiving a benefit?
A. People on income-tested benefits will not have contributions deducted from their payments. However voluntary contributions can be made if desired.
Q. What if an employee is on parental leave?
A. If the employee continues to receive a salary while on parental leave, KiwiSaver contributions continue to be deducted from their pay unless they take a contributions holiday. If no salary is being paid while on parental leave, contributions will stop automatically and restart when they return to work.
Q. What if an employee has more than one job?
A. If an employee has more than one job when they join KiwiSaver they can choose which of their jobs to contribute from. They must contribute from at least one of their jobs. However, if they start a new job after joining KiwiSaver they must notify their new employer that they are a KiwiSaver member and make contributions from this new job. After 12 months they can suspend contributions from any of their jobs by taking a contributions holiday.
Do employers contribute as well as employees?
From 1 April 2009, employees who contribute to KiwiSaver will be entitled to a matching employer contribution of 2% of salary and wages. To be eligible for the matching contributions, employees must be aged 18 or over and not yet be eligible to withdraw from KiwiSaver.
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.
An employer who fails to make deductions may be subject to penalties under the Income Tax Act 2004.
KiwiSaver members 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, and Employer Superannuation Contribution Tax (ESCT) will need to be deducted from any employer contributions over this level.
Q. Can I contribute more to my employees’ KiwiSaver accounts than the compulsory matching amount?
A. You can make any additional voluntary employer contributions that you wish, in accordance with how you wish to remunerate your staff. From 1 April 2009, employer contributions higher than 2% of salary will be subject to ESCT.
Q. Does the Government help with the cost of making employer contributions?
A. The Employer Tax Credit that offsets the cost of making employer contributions to KiwiSaver will be discontinued from 1 April 2009.
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When can members withdraw their 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 |
The 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 the total account balance |
Q. What happens if a member dies?
A. In the event of the death of a KiwiSaver member, their account balance becomes part of their estate.
Q. What if a member declares bankruptcy?
A. If a KiwiSaver member is declared bankrupt their Official Assignee may recover their contributions under some circumstances.
What are my responsibilities as an employer?
KiwiSaver has been designed around existing processes and the PAYE system, so employers have an important role to play. The flow chart below illustrates how the overall KiwiSaver process will impact you as an employer.
Should we choose a preferred KiwiSaver provider for our staff?
Take-up to KiwiSaver has dramatically exceeded expectations, with hundreds of thousands of New Zealanders opting in. Take-up is expected to grow further over time.
Choosing a preferred provider such as Grosvenor can help make KiwiSaver easy for you to manage. With new employees allocated to a preferred scheme instead of spread between the default providers, you’ll have greater consistency of returns, choices, and administration for your staff. You’ll also have greater flexibility in offering KiwiSaver to your employees.
Your staff are likely to have questions about how they can benefit from KiwiSaver and which investments they should choose. The Government recommends you do not give investment advice to your staff – such advice should be given by a professional. You may become liable if you inadvertently give advice to your staff.
With Grosvenor as a preferred provider you’ll have access to an adviser for your staff who can deal with queries and help them make the right choices. Your adviser can also help you approach KiwiSaver from a business perspective and ensure that KiwiSaver runs smoothly for your organisation.
Why will people join KiwiSaver?
KiwiSaver is an easy way to save, with contributions being deducted directly from salary. With the significant benefits that the Government has put in place for KiwiSaver members, hundreds of thousands of New Zealanders have opted in.
• A $1,000 kick start contribution will be credited to each member’s account when it is opened.
• The Government will match member contributions up to $20 per week ($1,040 per year). These will be paid directly into members' KiwiSaver accounts after the end of each year.
• Matching employer contributions at 2% of salary from 1 April 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/
• With Mortgage Diversion, after one year KiwiSaver members can divert up to half of their contribution rate to go towards mortgage payments over their home.
What are the benefits worth?
Employees can be significantly better off saving through KiwiSaver, compared to saving outside of KiwiSaver. Business owners can also join KiwiSaver and receive most of the benefits that it provides, including the $1,000 kick start and matching Government contributions.
The table shows the value of each of the KiwiSaver benefits for a KiwiSaver member on $40,000 per year saving 4% of salary. With savings set aside for retirement, the benefits grow with compound interest 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 | 
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