How Does KiwiSaver Work?

Date Apr 29, 2021
By Staff Writer

Saving for your future as early as possible is one of the most common pieces of advice most people get as they grow older. This was given more emphasis with the recent pandemic and the economic uncertainty that followed. With KiwiSaver, Kiwis no longer have to go through hours of researching options and ways to save as they can easily join the savings scheme to get started.

It's easy to get discouraged joining a savings scheme, and understandably so since it's your hard-earned money that will be put on the line. But KiwiSaver was set up by the NZ government to help people save for their retirement, so you can be sure that your money is well taken care of and you'll always have some cushion for life's emergencies.


Here's a step-by-step guide to help you:

Step 1: Know what you're getting yourself into.

Before joining KiwiSaver, make sure you have an idea of what it is. Basically, KiwiSaver is a savings initiative by the NZ government where Kiwis can voluntarily contribute a certain amount to save for their retirement.

An important question to ask yourself: what am I saving for?

A reason as simple as saving up for your future is enough, but having clearer and more concrete goals like saving up for retirement, for your family, or a house makes joining KiwiSaver even better. Over time, you'll have a more clearer vision of your savings fund. KiwiSaver is one of the safest and easier ways to get started with long-term savings.

If you're saving for your retirement, you have the option to withdraw your KiwiSaver fund when you reach the age of eligibility which is 65 years old. 

Note: If you're aged between 60-64, and you joined KiwiSaver before July 1, 2019, you cannot withdraw your KiwiSaver funds for five years.

If you're saving up for a house, you can make a withdrawal after three years of being a KiwiSaver member or qualify for the First Home Grant that can grant you up to $5,000 for an existing home or up to $10,0000 for a new home or a piece of land.

Step 2: Make sure you are qualified to join.

You're qualified to join if:

  • You're a New Zealand citizen
  • Living in New Zealand
  • Will be living in New Zealand permanently

Note: You're automatically enrolled if you are aged 18 to 65 years old or about to start a job with a new employer.

If you're eligible to join, you may do so by asking your employer to help you with the process, and if you're self-employed or currently not working, you can pick a provider you like and contact them directly to sign up. 

Here's a list of providers you may contact.

  • If you're under 18 years old, you can join through a scheme provider.
  • If you're 16 or 17 years old, you need at least one legal guardian to co-sign your application.
  • If you're under 16 years old, consent from all your legal guardians is required.

Step 3: Know how much you can contribute.

You have five options to choose from in terms of how much you can or plan to contribute to your KiwiSaver account: 3%, 4%, 6%, 8%, or 10% of your gross salary.

If you signed up through your employer and did not choose a contribution rate, the default rate, which is 3%, will be deducted by your employer.

Done with all the steps? It's time to get a deeper understanding of KiwiSaver and how it works!

What if I'm not ready yet or changed my mind? 

As mentioned earlier, you're automatically enrolled if you are aged 18 to 65 years old or about to start new work with a new employer. If you're feeling pressured or still not ready for a KiwiSaver membership, you have the option to "opt out".

Note: Make sure to opt out between 2-8 weeks of starting a job.

I've decided to join KiwiSaver. How do I start?

The great thing about KiwiSaver is you can join or "opt in" whenever you're ready. Just let your employer know or contact your preferred provider directly. Joining KiwiSaver is a serious commitment, which means once you've joined, you can't just "opt out" whenever you please. So make sure this is something you're ready to commit to. Your employer will deduct the necessary amount from your salary, or you can make voluntary contributions directly to your provider, depending on how you joined KiwiSaver.

Am I on the right KiwiSaver fund?

How it works: NZ providers run KiwiSaver schemes, which have several funds that you can choose from to help you save. You can select a fund option yourself or through your employer. You may also have the NZ government pick for you from one of the default schemes.

Most people make the mistake of choosing a fund that doesn't fit them or gets discouraged when their fund do not give them their desired results.

Switching to a different fund can make a lot of difference! When choosing one, make sure to base your decision isn't just based on your bank or other people's opinion. Pick one that's fit for your situation or lifestyle, has affordable fees, and has great reviews on customer service from customers.

There are five basic types of KiwiSaver funds to choose from:

  • Defensive
  • Conservative
  • Balanced
  • Growth
  • Aggressive

Each fund has a corresponding risk level and an ideal number of years to invest before you get to see some results. These funds contain a mix of investments, and the more risk you're willing to make, the higher your chances are of getting good results. That said, the higher the risk also means higher chances of ups and downs, so make sure you're choosing a fund that matches the level of risk you're willing to take.

Are there any other benefits I can get when I join KiwiSaver?

  • Government KiwiSaver contribution

Your KiwiSaver provider applies for this KiwiSaver government contribution for you. It happens annually, and the amount of the contribution will depend on how much you've contributed (at least $1042.86) to their fund from July 1 to June 30. The amount you can receive is up to $521.43.

  • Compulsory employer contributions

If you've been enrolled by your employer, they're required to contribute as well. Your employer's contribution is equivalent to a minimum of 3% of your gross pay.

  • KiwiSaver withdrawal for your first home

Buy your first home by withdrawing from your KiwiSaver account after three years of contributing, but leave at least $1000 in your account. Note that not all funds allow this kind of withdrawal.

You may check complete details of KiwiSaver benefits here.

What else can I do with my KiwiSaver scheme?

Some circumstances in life are out of our control, which is why KiwiSaver allows you to make the following changes to fit your current situation:

Take a savings break

You may temporarily stop your contributions if you suddenly can't afford your contributions, etc. Please note that this may depend on how long you've been contributing to KiwiSaver.

Update your KiwiSaver contribution rate

You may increase or decrease your contribution rate, depending on how much you're willing to deduct on your salary. Your options are 3%, 4%, 6%, 8%, or 10% of your pay.

Switch to another provider

You can do this any time, but you can only be a member of one provider at a time.

Continue to contribute even if you leave or lose your job

If you leave or suddenly lose your job, you may still contribute to your KiwiSaver scheme.

Can I get my KiwiSaver funds early?

A quick answer would be yes, but you will need to have a valid reason first. Here are some situations where you can get your savings early:

  • Buying a house
  • Moving overseas
  • In need of financial help
  • For health reasons
  • Bankruptcy

You may read more about this here

Ready to save for your future? Finding the right KiwiSaver scheme for you just got easier.

Use CompareBear's comparison tool and compare KiwiSaver schemes today!