kiwisaver, contribution, investing

Should I contribute more to KiwiSaver or pay off my debt?

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If you have some extra cash on your hand, should you focus more on investing the money in KiwiSaver for your retirement or using that money to pay off your debt? What would help you get ahead more? Before you can answer these questions, you need to take other factors into consideration. You can, for example, look at the expected return rate of your KiwiSaver account and the interest rates of your debt. 

Comparing return rate to interest rate

To make a comparison, we will need to take the average 5 year returns for different KiwiSaver fund types. Note that the return rates would vary dramatically depending on the provider managing your investment in KiwiSaver.


KiwiSaver Funds

Average Return Rates











Credit cards tend to have higher interest rates compared to any other loans or debt you may have. In New Zealand, credit card interest rates can range from 9% to 25%. So, by considering only this one factor of expected return rates and interest rates, it would make more sense to pay off your credit card debt first. That is taking into account that the interest rate may be a lot higher than the expected returns from KiwiSaver.

For any other debt, such as personal loans, the interest rates are varied and can start from just 6%. Depending on the interest rate for your loan, if your KiwiSaver fund offers a higher return than that interest rate, it would make more sense to put your money into KiwiSaver and let your money grow there.

Consider the benefits from KiwiSaver

Usually any form of debt reduction is good - the more debt you pay off now means less interest to pay at a later date. A general rule is to pay off all the debt you have before you start investing, however there are some exceptions to this rule, especially for those who are contributing to KiwiSaver.

The benefits you get from KiwiSaver include government and employee contributions. The government contributes 50 cents for every dollar you put into KiwiSaver, up to $521.43 annually, adding up to a substantial amount over the years. As well as this, your employer is required to contribute at least 3% of your annual income to your KiwiSaver account when you are also contributing at least 3% to KiwiSaver. These factors should also be considered before deciding to either pay off your debt first or contribute more into KiwiSaver.

What is better for you?

The examples above are overly simplified and there are many more important factors you need to consider before making any decision that could impact your financial future. One being the volatility that comes with investing, especially when investing in a more aggressive KiwiSaver fund, as your volatility appetite might change. You should also take into account that past returns do not always guarantee future returns.

At National Capital, our Authorised Financial Advisers work hard to make sure we take every important factor of our clients’ situations into account before developing their KiwiSaver plan. We can help you figure out how much you should be contributing to KiwiSaver with considerations to any debts you may have. Submit our KiwiSaver HealthCheck to have your own personalised KiwiSaver investing strategy.

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Should you increase your contribution to KiwiSaver? Take our KiwiSaver HealthCheck to be more confident in your financial decisions.

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