How KiwiSaver actually works

KiwiSaver is New Zealand’s voluntary, work-based retirement savings scheme. The idea is simple: money goes in regularly from a few different places, it’s invested so it grows over time, and it’s there for you when you retire – or when you buy your first home. Here’s how the pieces fit together.

Where the money comes from

Three sources usually feed your KiwiSaver:

• You. If you’re an employee, you choose a percentage of your before-tax pay to contribute. You can also add lump sums any time.
• Your employer. If you’re contributing from your pay, your employer generally has to contribute too, on top of your wages.
• The Government. Each year the Government adds a top-up if you’ve contributed enough yourself, for eligible members. The rate and cap are set by the Government and can change, so it’s worth confirming the current figure.

If you’re self-employed or not working, there’s no employer contribution – but you can still contribute, and you can still qualify for the Government top-up.

Your money gets invested

Your contributions don’t sit in a bank account earning next to nothing – they’re invested in a fund run by your KiwiSaver provider. Funds range from conservative (mostly cash and bonds) to aggressive (mostly shares). Over a long time, the type of fund you’re in makes an enormous difference to your final balance, because returns compound year after year.

The catch: most people never actively chose their fund. They were auto-enrolled through a job and left in a default fund. That’s rarely the best fit for your goals.

When can you take it out?

KiwiSaver is designed for the long haul, so it’s generally locked in until you turn 65. The main exceptions are:

• Buying your first home – after three years of membership, most of your balance can go towards a first home.
• Significant financial hardship, serious illness, or permanent emigration – each has its own criteria.

The three levers that matter

Whatever your age, your KiwiSaver comes down to three things you can actually control:

1. The fund you’re in – is it right for your timeframe?
2. How much goes in – are you capturing every employer and Government dollar?
3. The value you get for your fees – judged the only fair way, on returns after fees.

That’s exactly what a KiwiSaver review looks at. If you’ve never had one, a free check is a good place to start – and to feel what decades of compounding actually do, spend two minutes with our compound interest calculator. Or talk to an adviser and we’ll walk through it together.