KiwiSaver - Everything You Need To Know

KiwiSaver sign up may feel a bit confusing, and you may not know what questions to ask. But here at National Capital we believe in giving more power to the client. We will go over the most important information you need to know as someone joining KiwiSaver or an existing investor that wants to know more. Every one from KiwiSaver self employed to someone nearing retirement can benefit.

Performance and Fees comparison for all KiwiSaver CHOICES

National Capital is specialised in investment research. We have a list of all the KiwiSaver companies on this page. There are different considerations when choosing KiwiSaver for someone planning to use their savings for retirement as compared to someone who is looking to use them for a First Home purchase. If you are planning to use them for retirement, you need to take into consideration your retirement income goals, the lump sum you need at retirement, and your current balance and rate of savings. You will also need to take into consideration your capacity and tolerance for volatility.

We have tried to answer the question of “How does this KiwiSaver choice compare to others?”. Click on the name of your current KiwiSaver company at the bottom of this page to see how it compares against others in the market and get an indication if it is the appropriate one for you.

Which is the right fund for me?

However, please note that the information on the pages linked from here is not personalised financial advice for KiwiSaver sign up. If you want advice based on your own circumstances and goals, follow the HealthCheck application on our website. National Capital was founded in 2018 and now advises Kiwis on over $70 million of their KiwiSaver savings. We are based in Auckland, but serve clients all over New Zealand. We provide free advice, with the goal of empowering one million kiwis to become financially secure.

KiwiSaver Quicklinks

Whether you're thinking of joining KiwiSaver for the first time, in KiwiSaver self employed, or already in a company recommended, here are some quick links to the most common queries: 

Simply put, KiwiSaver is a voluntary investment and savings scheme. It was set up by the New Zealand government to help Kiwis save for buying their first home or retirement. Its features include a nationwide auto-enrolment through KiwiSaver sign up when getting a first job. Employees are automatically enlisted into KiwiSaver sign up but have the choice to opt out if they don’t want to participate. A percentage of your salary is deposited, as well as a contribution from your employer. By choosing to stay in a KiwiSaver plan, your employers are obligated to contribute a minimum of 3% of your salary too. The contributions you make range from 3, 4, 6, 8, or 10% and it is 100% your choice. The government also offers capped annual contributions. Joining KiwiSaver prior to 2015 meant that the government deposited a $1000 lump sum. Although they no longer offer this, the government will contribute 50 cents to every dollar you deposit. This government contribution is capped at a maximum of $521.43 per year.

When joining KiwiSaver, you’re able to choose your preferred KiwiSaver company and fund type. If you’re not sure, you’ll automatically be enlisted in a default scheme but you can always change later. Many people come to National Capital long after KiwiSaver sign up to check if they’re in the right scheme.

Your KiwiSaver investment can be accessed for retirement, your first home deposit, or other uncommon circumstances. It is predominantly seen as a long-term investment to ensure a comfortable lifestyle beyond retirement. In the event that you are emigrating out of New Zealand, you may be eligible to withdraw your savings. However, strict guidelines and criteria are in place to minimise cases of early withdrawals.

Why KiwiSaver was introduced.

KiwiSaver was introduced in 2007, as a way for Kiwis to save enough money towards either their first home or retirement. Before KiwiSaver, Kiwis needed to rely on a weekly $437 NZ superannuation payment once they reached the retirement age of 65, as well as whatever retirement savings they had set aside. Kiwis tend to spend more than what is provided by NZ superannuation as living expenses continue to increase. Thus, KiwiSaver eases financial stresses that may occur in retirement.

More specifically, a trend had come to the government's attention, duly pointed out by Sir Michael Cullen. New Zealand had some of the lowest savings per household compared to other developed nations. Cullen also pointed out that an estimate was done on the savings rates per household and it was a negative 17.5%. In March 2007, four months before it became active, the NZ Treasury revealed the results of a study. It showed that around 20% of New Zealanders (between 45-64 years old) did not have enough for retirement. During that time, the study revealed that current retirees had their private savings and mortgage-free homes to sustain their retirement. The worry was around those who were younger that had large debt, a mortgage, student loans, and young children. KiwiSaver sign up was a tool introduced to get more low and middle-income households investing for retirement. 

Before it was introduced, there were retirement plans available but only around 600,000 people from the workforce were enrolled. In a survey done in 2001, less than 20% of people earning between  $15k to $50K were enrolled in a retirement plan. This served as a big concern on which Sir Michael Cullen based his target audience when setting up KiwiSaver.

Who pioneered KiwiSaver?

In August 2006, the law passed, giving it the go-ahead and the driving force behind this was Sir Michael Cullen. He was the Minister of Finance and was the great architect of not only KiwiSaver but of Working for Families. Sir Michael Cullen was born February 5th, 1945 in the town of Whakatane and led a three-decade political career. He served as the deputy prime minister to Helen Clark between 2002-2008 as well as the deputy leader of Labour. He retired in 2009 from Parliament but then went on to be involved in Treaty of Waitangi settlement negotiations. Moreover, chairing New Zealand Post, and the Earthquake Commission.

July 1st, 2007 marked the beginning of KiwiSaver officially. Two years in, just under 100,000 New Zealanders had enrolled by joining KiwiSaver. Major progress has been made since then and most if not all working Kiwis are aware of the scheme. Features like online applications have made the process easy to apply for KiwiSaver self employed, teenagers, and the entire workforce.

Unfortunately, in March 2020, Sir Michael announced that he had lung cancer and died in August 2021 at the age of 76. Prime Minister Jacinda Ardern gave a speech in his honour to which she said, “Sir Michael was one of the most influential figures in New Zealand politics over the last 40 years. Intelligent, funny, and kind, he left a significant legacy for the country.”

Most certainly, he is remembered for leading the way forward to the establishment of KiwiSaver among many achievements. Whether joining KiwiSaver self employed or through a company, Sir Michael Cullen wanted all Kiwis to be more financially secure. As of June 2021, more than 3 million people are active members. An important milestone to be proud of.

What is joining KiwiSaver for and who can participate?

KiwiSaver sign up is intended to help you save for your future. It is for those looking for a simple way of investing their money that is actively managed by the KiwiSaver managers. Ultimately, setting New Zealanders up with enough savings to live comfortably once retired. It was created to fix the issue of many pensioners living in poverty. You may know that joining KiwiSaver can help you save for either your first home or for retirement. The best way to find out which KiwiSaver is best for you is by talking with your financial advisor or contacting us at National Capital here. It doesn't matter if you are joining KiwiSaver self employed or working for a company, we can help.

As per IRD, anyone who lives in NZ can join if they are an NZ or Australian citizen or resident. On the other hand, you cannot participate if you hold a temporary, student, or visitor visa. Furthermore, if you’re a citizen but just visiting NZ or are on holiday, you cannot join KiwiSaver. 

For those under the age of 18, there are some rules around your KiwiSaver sign up and participation. Firstly, you can only join through a scheme provider and not through your employer. There are around 30 different KiwiSaver providers. For those who are 16 or 17 years old, they must have at least one legal guardian to sign their application. If not, they can contact the scheme provider about joining KiwiSaver. Anyone under the age of 16 must have all legal guardians sign the application as they cannot self-enroll without it. To find out if you are eligible for joining Kiwisaver, visit IRD’s website and take the eligibility quiz.

After meeting the set criteria, you can join KiwiSaver self employed or if you work for a company.

How difficult is the KiwiSaver sign up process?

Joining KiwiSaver is relatively simple. When you start a job, you are typically instructed to fill out a KiwiSaver sign up form. According to IRD, your employer may present you with one of two forms, the IR346K form or a KS2 form.

The IR346K form is for KiwiSaver sign up for a new employee who is eligible but has not enrolled yet. This form is typically completed during the onboarding process and is a way of automatically enrolling into KiwiSaver. The information required of the employee includes: 

• Name
• IRD Number and tax code
• Contact details
• Date of birth

For new employees that are already enrolled, you must fill out the KS2 form. It’s intended to determine the percentage deduction rate that the employee prefers and check whether they have a savings suspension. 

If you have KiwiSaver self employed, you can get these forms online through the IRD website or your myIR login.

You can also join KiwiSaver directly from your preferred provider’s website. The process of joining KiwiSaver this way has been made hassle free in recent years. You simply need your IRD number and tax code on hand in addition to some contact information and you’re set. 

Regardless of whether you’re joining KiwiSaver through an employer or have signed up for KiwiSaver self employed, one thing remains. You must choose between funds that best align with your short, medium, and long-term goals. While the process has become simple to do online, making the right decision should be thought out. If you need some free professional KiwiSaver advice, National Capital is here to help you make the right choice.

Before or after joining Kiwisaver, there are multiple ways to see which KiwiSaver option is best for you. Here at National Capital, we provide a HealthCheck to determine how financially tolerant you are and your capacity to save. National Capital’s HealthCheck takes into consideration your goals and how you react to changes within the market. Depending on whether you are buying your first home or retirement, talking with a financial advisor will allow you to make the best decision.

In truth, all KiwiSaver firms are held to a high standard by financial regulators. For many Kiwis when joining KiwiSaver or a few years in, there is very little difference in results. The same goes for joining KiwiSaver self employed or with a company, they all accommodate new customers similarly. Of course, we can recommend the best option for you from KiwiSaver sign up at a young age. However, you will start seeing a significant difference in results when your balance is relatively high. 

For example, when your total savings balance is $10,000, an additional 1% in yearly returns equals $100. This is a figure you’d expect in the early years after KiwiSaver sign up. Everyone would take an extra $100 every year if offered, of course. However, it is not significant enough to worry too much about.

Now, let’s assume you’re in your 50’s and have accrued a balance of $500,000 in your KiwiSaver. That additional 1% in yearly returns equals $5000 of potential returns. In this case, KiwiSaver sign up with the best scheme can end up generating a significant amount of additional returns.

Am I taxed on my KiwiSaver?

Before KiwiSaver sign up, this is a valid question to ask. The only money which is taxed is the earnings gained from your KiwiSaver returns each year. This means that you aren’t paying out of pocket for the returns, and is taken off the amount made within the year from the account. Any money that is withdrawn from your account is tax-free.

KiwiSaver is taxed like any other investment fund type here in NZ. When joining KiwiSaver you will determine your Prescribed Investor Rate (PIR) to determine your tax rate. As a New Zealand resident, you will typically fall into one of the following: 

• If yearly income is $14,000 or less and total including PIE is below $48,000 = 10.5%
• If yearly income is $48,000 or less and total including PIE is below $70,000 = 17.5%
• If yearly income is above $48,000 = 28%

The good thing is that once you set your PIR, whether you joined KiwiSaver self employed or through a company, you don’t need to manually do your taxes on it. Any payable tax is automatically taken from your KiwiSaver balance depending on your investment returns.

Do I have to pay upon KiwiSaver sign up?

Depending on your provider, your KiwiSaver fees may vary. This includes annual management fees and fixed quarterly payments. Fees are based on your savings amount, and the services your fund provides. It is in your best interest to compare the fees with the returns when comparing funds. Although you may receive higher returns, they may be outweighed by the fees charged. Check with your provider to see what you're paying if you aren’t sure. You can also contact National Capital to help track down these figures for you. 

Over the past few years, fees have decreased with a push from various government actions. However, it is understandable for a KiwiSaver firm to charge a management fee in order to provide the service. After all, it is a business with expenses and profit expectations. In order to hire the best financial analysts and investors to manage our funds, they need to pay good salaries. 

Importantly, during KiwiSaver sign up, you should not mistake higher fees for better performance and vice versa. There isn’t a clear correlation between KiwiSaver fees and performance, thus you need to look at other factors when selecting. Lastly, there is no difference in fees whether you are joining KiwiSaver self employed or through an employer.

Are returns in KiwiSaver guaranteed?

No, KiwiSaver, much like other investments is not guaranteed to give specific returns. However, we can look at long-term averages to get an indication of the range of expected returns from different types of funds. Of course, KiwiSaver performance data will fluctuate over time. 

These are the average KiwiSaver returns per annum for the last decade for the major funds:

• Average Default Fund - 5.4%
• Average Balanced Fund - 5.9%
• Average Growth Fund - 6.7%

Whether joining KiwiSaver self employed or in a company, you shouldn’t neglect the fact that investments can go negative. However, history will tell us that long-term investment has an upward trend. 

You may ask if that’s the case then when should I worry? You can start taking action if you see your KiwiSaver underperforming competitors on a consistent basis. That may be confusing to keep track of and that’s where National Capital comes in. Whether you’re in KiwiSaver self employed or have been put into a company default provider, we can help.

Can you lose money investing in KiwiSaver?

KiwiSaver sign up, like any other investment, is not insulated from market volatility. This means that your money can go up or down in value. Therefore, the short answer is yes. You can lose money on KiwiSaver. When joining KiwiSaver, this is important to know so that you can make the right decisions when your balance is in the red.

However, it is not as doom and gloom as it sounds. Companies in the main global markets, in general, go up and down in value all the time. Reasons can vary from news articles to bad ad campaigns, and global pandemics like Covid-19. No matter how tech-savvy the financial industry gets, it is impossible to predict and guarantee investments as totally risk-free. KiwiSaver firms work full time in researching market trends and analyse companies to ensure they have a sustainable business model.

Additionally, professionals working in a KiwiSaver company invest your money in a way designed to spread the risk. Whether this is across different companies, industries, or markets. For example, looking closely at the breakdown of your fund, you will see many companies across multiple industries. KiwiSaver firms structure your investment this way particularly to spread risk and minimise the impact of unforeseen downwards trends.

Source: Google Finance

In conclusion, as company valuations are susceptible to downgrades, you can lose money on the scheme. However, history tells us that investing in stable markets, KiwiSaver has grown in value in the long term. Let’s take a look at the NZX50 Market Index from inception in 2003 to the end of 2021. We can see dips and drastic loses along the way but the value over those 18 years has increased 585%. This leads us to the ultimate point in this topic. Timing is everything.

According to the Financial Markets Authority 2021 Annual Report the average person has a balance of $26,410. This figure is up 29% from the previous year. 

Meanwhile, the total number of people that have completed the KiwiSaver sign up process and are currently members is 3,090,631. People joining KiwiSaver lifted this figure up by 2.1% from the previous year.

Your balance is a combination of your contributions, your employer and government contributions, and your KiwiSaver performance. When using KiwiSaver self employed, your and employer contributions are one and the same. The three types of contribution (you, employer, and government) collectively make up your overall contributions. Your KiwiSaver company invests contributions in your chosen funds with the goal to yield a positive return on your investment. Thus the purpose of joining KiwiSaver is to incentivise Kiwis to save and invest for the future.

Out of 3,090,631 people registered in KiwiSaver, only 1,883,118 members contributed to their accounts. If they don’t contribute themselves, this means they don’t receive any government or employer contributions either. Thus, are solely reliant on KiwiSaver performance for their balance to increase. 

Having been set up in 2007 means it is relatively young compared to other retirement schemes. Therefore the median balance is still relatively low (although growing at a good rate). Consistent contributions and an incremental positive return will undoubtedly lead to growth in the average balance. 

Whether considering KiwiSaver self employed or your employer has handed you a KiwiSaver sign up form, you shouldn’t think twice. It’s never too late to start saving for retirement and joining KiwiSaver is a great way to start.