KiwiSaver is an initiative to encourage New Zealanders to save for their retirement. It came into effect on 1 July 2007.
It's an important initiative that offers lots of benefits, so it's worth taking the time to find out more about it. If you'd like to know more about KiwiSaver, and the TOWER KiwiSaver Scheme, you've come to the right place!
KiwiSaver works by deducting money straight from your pay and putting it into your KiwiSaver scheme account. It works like PAYE, and uses the PAYE system to invest your money via Inland Revenue.
Your employer is responsible for providing you with information on KiwiSaver. If you are enrolled or sign up they'll manage your contributions and send them through to Inland Revenue to your chosen KiwiSaver scheme. Your employer is currently required to make a minimum contribution to your TOWER KiwiSaver Scheme account of 3% of your gross salary or wages less ESCT (subject to certain exceptions, refer to the TOWER KiwiSaver Scheme investment statement for further details).
You have a lot of choice when it comes to KiwiSaver, including who you want to look after your money. If you don't choose a provider, Inland Revenue will choose a default provider for you. Your employer may also choose a provider.
There are five default providers including TOWER Managed Funds Limited (TMF), but it's much better for you to choose your own KiwiSaver provider.
If you start a new job you are automatically enrolled in KiwiSaver, however you can opt out between week 2 and week 8 of your employment, and any contributions you've made will be refunded to you.
When you first enrol in KiwiSaver the Government will give your KiwiSaver scheme a $1,000 kick start to help get you going.
If you are between 18 and the age of eligibility for a retirement benefit from KiwiSaver, the Government will currently contribute 50 cents for every $1 (dollar) you contribute, up to a maximum of $521.43 per year, subject to qualifying criteria.
It is compulsory for your employer to make a minimum contribution of 3% of your gross salary or wages to your KiwiSaver scheme account, if you are over 18 years old and not yet eligible to make a retirement withdrawal from KiwiSaver, and contributing the minimum amount. Employer contributions are subject to ESCT which will be deducted before the employer contribution is paid into your KiwiSaver account.Your employer can contribute more than the minimum if they wish.
As long as you meet certain criteria, you can also use your TOWER KiwiSaver Scheme savings to put towards the purchase of your first home.
KiwiSaver is a long term retirement savings scheme. This means contributions are generally locked in until you're eligible for NZ Super (which is age 65 at the moment), or until you have been a member of a KiwiSaver scheme and/or a complying superannuation fund for five years – whichever is the later ('retirement age').
After that, you can choose to withdraw part or all of your savings as a lump sum, or you can make regular withdrawals, or you can simply continue saving.
Partial withdrawals on reaching retirement age are subject to a minimum of $500 per withdrawal. Regular withdrawals are subject to a minimum of $250 per fortnight or $500 per month. You cannot make a partial or regular withdrawal if it would result in your TOWER KiwiSaver Scheme balance falling below $1000. If you do the Manager is entitled to treat your request as a request to withdraw all of your account balance. The Manager may change these minimum amounts and introduce other restrictions from time to time.
You may be able to cash in a portion of your investment in KiwiSaver (which may or may not include the $1000 Government kick-start and member tax credit) prior to reaching retirement age. These circumstances are:
When cashing in your investment, any member tax credits are not payable if your withdrawal is for permanent emigration, or where your permanent residence was outside New Zealand but you had received the member tax credit for that period. You cannot access the $1000 Government kick-start or your member tax credit if you wish to make a withdrawal due to significant financial hardship or for the purchase of your first home. The $1000 Government kick start contribution and member tax credit will be payable on a withdrawal for serious illness. You may not charge or borrow against the security of your KiwiSaver balance.