KiwiSaver - How Government benefits work for you

We believe the benefits to join are very compelling for most New Zealanders. Here's why:

KiwiSaver Incentives

• You get a kick start of $1000 when you join - paid into your KiwiSaver account
  
• An annual fee subsidy of $40 - to offset any fees associated to your KiwiSaver plan
  
• You get up to another $1,040 each year - if you are aged 18 or over your KiwiSaver contributions will be matched by the Government up to a maximum of $20 per week. This is called a "Member Tax Credit"
  
• Your employer also has to contribute - from April 2008 your employer has to match the contributions to KiwiSaver starting at a minimum of 1% of your pay, and increasing until it reaches 4% in April 2011
  
• Employer's matching contributions will be paid tax free - up to a maximum of 4% of your gross wages or salary. (employer contributions to non-KiwiSaver compliant superannuation plans are currently taxed at 33%)
  
• You may get up to $5000 for a deposit on your first home - rules apply
  
• You can use some of it to pay off your mortgage - after 12 months you can divert half of your contributions to mortgage payments on your main home. Effectively reducing employee contributions from 4% to 2%.

Details of the above benefits of KiwiSaver are only available subject to the terms of specific legislation enacted or to be enacted.

So how does KiwiSaver compare to a non-KiwiSaver investment?

Well for employees it's like giving yourself a pay rise. This table demonstrates how an employees KiwiSaver savings growth (based on employee contribution of 4% of gross wages or salary) is accelerated as a result of the government incentives when compared with an identical non-KiwiSaver investment.

Are there any reasons not to join?

• You can't afford to save 4% (or an additional 4%) of your pay
• You'd rather pay off high interest debt first
• You don't want your savings locked away until you are 65 (or later)
• You have a super scheme that is better for you than KiwiSaver
• You have a retirement income plan that is at least as good as or better than KiwiSaver

Seek professional advice

There's plenty you can read about KiwiSaver. But sometimes too much information can make it hard to understand what's best for you. However working out your own situation should be relatively straightforward. We recommend the excellent Sorted www.sorted.org.nz and the Government's www.kiwisaver.co.nz websites for independent advice. They have some easy to use calculators you might find quite useful.

You can also obtain professional advice from a financial adviser. They will be able to discuss how KiwiSaver can work for you and provide advice on the different KiwiSaver providers available.

Should I join KiwiSaver?

With the incentives on offer, saving for your retirement through KiwiSaver is very attractive. It's not often we get free money from the government. The decision you make will depend on your financial commitments and goals. Not everybody has the same goals, so not everybody will make the same decision. Take your time to consider what's best for you - there are no deadlines to meet. And use the information sources available to you.