KiwiSaver turns ten years old on July 2nd, and since its introduction, it has provided an easy way for New Zealanders to save for their retirement. KiwiSaver began in 2007 as a government initiative to address New Zealand’s low levels of saving. It has proved popular; at the end of March 2016, there were just over 2.6 million members, according to a report published by the Financial Markets Authority. However, many Kiwis still aren’t aware of exactly how KiwiSaver works, and how they can make the most of it.
Who can join?
If you’re a New Zealand citizen or allowed to live in New Zealand indefinitely, and you normally live here, you can join KiwiSaver up to the age of 65. You can even open a KiwiSaver account for your children.
How does it work?
When you enrol, you nominate a portion of your salary to go directly to your KiwiSaver account – either 3%, 4% or 8%. If you’re a wage or salary earner, your employer must match your contributions by at least 3% of your salary each year. Additionally, if you save $1,042.86 or more each year, the government will contribute a ‘member tax credit’ of $521.00. The money goes into managed funds which are looked after by an approved KiwiSaver provider. These funds invest in things such as cash, bonds, property and shares, aiming to generate a good long-term rate of return. You cannot withdraw your funds, except in very special circumstances, until you turn 65.
Did you know?
Many people just sign up to KiwiSaver and forget about it, but here are some tips to help you get the most out of your investment.
Why should I join?
KiwiSaver has many benefits. It makes saving for your retirement easy by deducting a small amount directly from your salary each payday, so you don’t even miss it. Everything is already set up, so you don’t need to provide a large up-front deposit, or know a lot about investing, to get started.
If you’re a salary or wage earner, the fact that your employer and the government are supplementing your contributions means that you’re basically getting extra money for free!
New Zealand’s National Superannuation allowance is already a very modest payment. By the time you reach retirement, it may not even provide a living income. By providing for yourself with KiwiSaver, you’ll have the peace of mind that you’ll be able to enjoy your retirement and maintain the kind of lifestyle you’re used to, even if National Superannuation has disappeared altogether.
Whether you’re new to KiwiSaver, or you’ve been contributing for years but are not sure if your scheme is set up optimally, the team at True North Investments can help you ensure you’re making the most of your retirement savings plan.