KiwiSaver - The facts
In July of each year the IRD makes a Member Tax Credit (MTC) payment into the KiwiSaver accounts of contributing members aged between 18 and the age at which the member is entitled to receive their benefit (i.e. the latter of age 65 or after five years’ KiwiSaver membership).
For this scheme year (1 July 2012 to 30 June 2013), to claim the maximum MTC of $521.43 a member will need to have made contributions of at least $1,042 into their account. Employer contributions and government contributions do not count towards MTC ‘s.
If a member joins KiwiSaver part way through a year or turns 18 during the course of the year their MTC entitlement is pro- rated accordingly. Similarly, anyone turning 65 during the course of a year is only entitled to MTC credits for the period they were aged under 65 (unless they have been in KiwiSaver for less than five years in which case they are entitled to receive MTC’s for the full five year period).
Those contributing less than the required $1,042.86 have the option of making voluntary contributions before the end of the scheme year to ensure they maximise their MTC entitlement.
KiwiSaver Contribution rates
Employee's can contribute 3%, 4% or 8% of before-tax pay. The default rate is 3% and this is the minimum that you can contribute. If you already contribute this amount then you won't be able to pay less, unless you are eligible for a contributions holiday.
If you're not an employee (for example, you're self-employed, a contractor, not working, or receiving a benefit) then the contribution rate you have to pay will be set out in the contract you have with your KiwiSaver provider. There may be:
- a minimum annual sum
- specific payment periods that apply, such as monthly or quarterly
KiwiSaver Scheme General Benefits
The Government will make an annual contribution towards your KiwiSaver account as long as you are a contributing member aged 18 or over in the form of Member Tax Credits, of up to $521.43 p.a.
If you're eligible, your employer will also contribute an amount equal to 3% of your pay to your KiwiSaver savings.
You may be able to withdraw some or all of your KiwiSaver savings to put towards buying your first home.
Important points for KiwiSaver members to be aware of:
- Standard withdrawals
You become eligible to withdraw all your savings as a lump sum when you qualify for NZ Super (currently at the age of 65). If you joined KiwiSaver between the age of 60 and 65, you'll be able to withdraw your savings after you've been a KiwiSaver member for 5 years. Any withdrawals from your KiwiSaver account are tax-free.
- Significant financial hardship
If you can provide evidence that you're suffering significant financial hardship, you may be able to withdraw some of your KiwiSaver savings before retirement. Significant financial hardship might include:
- You're unable to meet minimum living expenses
- You're unable to meet mortgage repayments on the home you live in, resulting in your mortgage provider enforcing the mortgage on your property
- You're modifying your home to meet special needs because of you or a dependent family member having a disability
- You'repaying for medical treatment if you or a dependent family member becomes ill, has an injury, or requires palliative care
- You're suffering from a serious illness
- You're incurring funeral costs if a dependent family member dies.
- Contributions holiday
If you're an employee, once you've been a member for 12 months you can take a break from saving - this is called a contributions holiday. A contributions holiday is for employees who want to pause from making KiwiSaver contributions from their pay.
- Under-18 Enrolled In KiwiSaver
As part of the Government 2012 Budget, the tax credit for children was repealed from 1 April 2012 and the entitlement to claim it was withdrawn in May 2012.
This means if you're a KiwiSaver member, under 18, and you start working, even if it's a part-time job, KiwiSaver contributions will be deducted from your wages. You can choose whether you'd like to contribute 3%, 4% or 8% of your pay. If you're over 18, you'll be entitled to employer contributions.
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