With tens of billions saved and three million members, KiwiSaver is helping an increasing number of people buy their first home and fund their retirement years.
But how well do you know your rights? Here’s what you need to know about KiwiSaver at work.
You have choices
All employers have a ‘default’ KiwiSaver provider, for those employees who are automatically enrolled to join and don’t nominate a provider. However, even if you have been opted in, you can switch providers: you don’t need to stick with the provider your employer has chosen for you.
Making an active choice of fund is one of the best ways to ensure the fund you’re in matches up with your attitude to risk and your goals.
You can opt out
If you have been automatically enrolled into KiwiSaver, you can choose to opt out, between two weeks and eight weeks of employment, or in some other situations.
But before you do, make sure you know what you’re leaving. For example, your employer won’t be making their 3% contribution, and they are not required to pay this to you instead of KiwiSaver, if you choose to opt out of the scheme.
Are you a contractor? Keep in mind that your employer doesn’t have to contribute, even if you are making KiwiSaver payments yourself. Employers are actually only required to make KiwiSaver contributions for employee members.
You can increase your contributions
You don’t have to stick with the minimum, employer-equalled contribution of 3%. You could also increase your regular contribution to 4%, 6%, 8%, 10% or 12% or even make additional lump sum payments.
And remember, if you increase your contribution, your employer is only required to make the current contribution of 3%.
Plus, just like the rest of your KiwiSaver savings, even voluntary contributions above the minimum are still ‘locked away’ until you reach the age of retirement or meet one of the other criteria for early withdrawals. This is something to consider when budgeting for extra contributions; would you be more comfortable putting extra money in a savings account, knowing you can access it at any time?
Total remuneration packages
Generally, employer KiwiSaver contributions need to be paid ‘on top’ of your gross wage or salary. You may be able to agree with your employer to a ‘total remuneration package’ – which means that the package itself may include the KiwiSaver contribution. For example, your total package is $51,500, but your actual gross salary may be $50,000 and $1,500 would be the KiwiSaver contribution.
However, all employees in New Zealand are entitled to a minimum wage; this means that KiwiSaver employer contributions can’t be part of a total remuneration package, if the employee’s hourly rate then becomes less than the minimum wage.
A last word – check your KiwiSaver account regularly, to make sure your deductions and your employer’s contributions are being paid regularly (it can take up to three months for deductions and contributions to show) – and if there is any discrepancy, contact Inland Revenue to make sure you are getting what you are entitled to.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek financial advice.