Your Progress 0%

📖 What is KiwiSaver?

KiwiSaver is a voluntary, work-based savings initiative designed to help New Zealanders save for their retirement. Launched in July 2007, it has become one of the most important financial tools for building long-term wealth in New Zealand.

Key Point: KiwiSaver is more than just a savings account - it's an investment scheme where your money is actively invested in various assets like shares, bonds, and property to grow over time.

Why Was KiwiSaver Created?

Before KiwiSaver, many New Zealanders weren't saving enough for retirement. The government recognized that relying solely on New Zealand Superannuation (the government pension) wouldn't provide the retirement lifestyle many people wanted. KiwiSaver was introduced to:

  • Encourage regular retirement savings from an early age
  • Provide a structured, accessible investment vehicle for all workers
  • Reduce future pressure on government retirement funding
  • Help first-time homebuyers get on the property ladder
  • Improve overall financial literacy in New Zealand

How Does KiwiSaver Work?

KiwiSaver operates on a simple principle: regular contributions from your pay (and from the government and your employer) are invested on your behalf, growing over time through compound returns.

💡 The Magic of Compound Returns

Your KiwiSaver doesn't just earn returns on your contributions - it earns returns on your returns. This compounding effect means the earlier you start, the more your savings can grow, even if you contribute the same total amount.

Who Can Join KiwiSaver?

KiwiSaver is available to:

  • New Zealand citizens or residents of any age
  • Anyone under 18: Can join but don't receive employer contributions until they start working
  • Employees: Automatically enrolled when starting a new job (though you can opt out)
  • Self-employed: Can join voluntarily and make their own contributions
  • Non-workers: Can join and make voluntary contributions
⚠️ Important Note

If you're eligible for New Zealand Superannuation and living overseas permanently, you cannot join KiwiSaver. Similarly, if you're on a temporary work visa with no intention to settle permanently in New Zealand, you may not be eligible.

Is KiwiSaver Mandatory?

KiwiSaver is technically voluntary, but there are automatic enrollment provisions:

  • New employees: Automatically enrolled when starting a new job (unless you've opted out previously)
  • Opt-out period: You have between 14 days and 8 weeks from your start date to opt out
  • Existing employees: Not automatically enrolled but can join at any time
  • Re-enrollment: If you opt out, you can rejoin at any time
Statistics: Over 3 million New Zealanders are currently enrolled in KiwiSaver, representing more than 80% of the eligible working population. The total funds under management exceed $100 billion, making it one of the largest investment schemes in New Zealand.

💰 Understanding Contributions

KiwiSaver contributions come from three main sources: you, your employer, and the government. Understanding how these work together is crucial to maximizing your retirement savings.

Your Contributions (Employee Contributions)

As a KiwiSaver member, you choose how much to contribute from your before-tax pay. The standard contribution rates are:

Contribution Rate Annual Salary Example Annual Contribution Per Pay (Fortnightly)
3% (minimum) $60,000 $1,800 $69.23
4% $60,000 $2,400 $92.31
6% $60,000 $3,600 $138.46
8% $60,000 $4,800 $184.62
10% $60,000 $6,000 $230.77
💡 Choosing Your Rate

You can change your contribution rate at any time by contacting your employer (if employed) or your KiwiSaver provider (if self-employed or making voluntary contributions). Many people start at 3% and increase their rate as their income grows.

Employer Contributions

If you're an employee contributing to KiwiSaver, your employer must contribute at least 3% of your gross salary. This is essentially "free money" added to your retirement savings.

Example: If you earn $60,000 per year and contribute 3%, you put in $1,800. Your employer adds another $1,800 (3%), doubling your contributions to $3,600 per year - and that's before government contributions and investment returns!

Important Points About Employer Contributions:

  • Employer contributions are capped at 3% of your salary
  • They're calculated on your gross salary (before tax)
  • The Employer Superannuation Contribution Tax (ESCT) is deducted from employer contributions
  • Some employers offer more than the minimum 3% as an employee benefit
  • If you're on a contributions holiday, you don't receive employer contributions

Government Contributions

The New Zealand government provides annual contributions to help your KiwiSaver grow, but only if you're also contributing.

Member Tax Credit (MTC)

The government will contribute 50 cents for every dollar you contribute, up to a maximum of $521.43 per year. To get the full amount, you need to contribute at least $1,042.86 per year.

Your annual contribution: $1,042.86
Government matches 50%: $1,042.86 × 0.5 = $521.43
Total government contribution: $521.43
💡 Maximizing the MTC

Contributing at least $1,042.86 per year ($20.05 per week or $86.91 per month) ensures you get the full $521.43 government contribution. This represents a guaranteed 50% return on your investment!

Who Is Eligible for Government Contributions?

  • KiwiSaver members aged 18 or over
  • Not yet eligible for New Zealand Superannuation (currently 65 years)
  • Principally living in New Zealand (normally residing here)
  • Making contributions to KiwiSaver (can't be on a full contributions holiday)
⚠️ Common Mistake

Many people miss out on the full government contribution by not contributing enough. The MTC is calculated annually from 1 July to 30 June. Make sure you're contributing at least $1,042.86 during this period to maximize your government contribution.

Contributions Holidays

A contributions holiday allows you to temporarily stop your KiwiSaver contributions. This can be helpful during financial difficulties, but there are important considerations:

  • Minimum membership: You must be a member for at least 12 months before taking a contributions holiday
  • Duration: Contributions holidays can last from 3 months to 1 year
  • Extensions: You can apply for extensions indefinitely
  • Impact: During a contributions holiday, you don't receive employer or government contributions
  • Your fund: Your existing savings remain invested and continue to earn returns
Consider carefully: While contributions holidays provide short-term relief, they significantly impact your long-term retirement savings. The lost employer contributions (3% of salary) and government contributions (up to $521.43/year) plus the compound returns you would have earned can add up to tens of thousands of dollars over a working lifetime.

📊 Investment Options and Fund Types

Your KiwiSaver contributions are invested in various assets to generate returns over time. Understanding the different fund types and how they work is crucial to choosing the right strategy for your situation.

The Five Main Fund Types

KiwiSaver funds are generally categorized into five types based on their risk level and asset allocation:

1. Defensive (Conservative) Funds

  • Risk level: Very low
  • Asset allocation: Typically 80-100% in cash and bonds, 0-20% in shares/property
  • Expected returns: Lower but more stable (historically 3-5% per year)
  • Best for: People nearing retirement (within 5 years) or those who can't tolerate market volatility
  • Volatility: Very low - value remains relatively stable

2. Conservative Funds

  • Risk level: Low
  • Asset allocation: Typically 60-80% in cash and bonds, 20-40% in shares/property
  • Expected returns: Moderate (historically 4-6% per year)
  • Best for: People approaching retirement (5-10 years away) or conservative investors
  • Volatility: Low - minor fluctuations possible

3. Balanced Funds

  • Risk level: Medium
  • Asset allocation: Typically 40-60% in shares/property, 40-60% in cash and bonds
  • Expected returns: Moderate to high (historically 5-7% per year)
  • Best for: People 10-20 years from retirement seeking a middle ground
  • Volatility: Medium - noticeable ups and downs but relatively stable long-term

4. Growth Funds

  • Risk level: High
  • Asset allocation: Typically 60-80% in shares/property, 20-40% in cash and bonds
  • Expected returns: High (historically 6-9% per year)
  • Best for: People more than 20 years from retirement who can weather market volatility
  • Volatility: High - significant short-term fluctuations are common

5. Aggressive Funds

  • Risk level: Very high
  • Asset allocation: Typically 80-100% in shares/property, 0-20% in cash and bonds
  • Expected returns: Highest (historically 7-10% per year)
  • Best for: Young investors (under 35) with 30+ years until retirement
  • Volatility: Very high - substantial swings in value year-to-year
💡 Understanding Risk vs. Return

Higher risk funds have the potential for higher returns but also greater losses in the short term. Lower risk funds are more stable but typically grow more slowly. The key is matching the fund type to your time horizon and risk tolerance.

Asset Classes Explained

Cash and Cash Equivalents

Short-term deposits and money market investments. Very low risk but also low returns. Think of this as similar to a high-interest savings account.

Bonds (Fixed Interest)

When you invest in bonds, you're essentially lending money to governments or companies who pay you interest. Generally lower risk than shares but higher than cash. Returns are more predictable.

Shares (Equities)

Ownership stakes in companies. Higher risk but historically provide the best long-term returns. Value fluctuates based on company performance and market sentiment.

Property

Investments in commercial or residential property, either directly or through property funds. Moderate to high risk, with returns from rental income and capital gains.

Historical Perspective: Over the past 30 years, growth and aggressive funds have significantly outperformed conservative funds despite short-term volatility. A $10,000 investment in 1990 would be worth approximately $80,000 in an aggressive fund versus $35,000 in a conservative fund by 2020 (assuming average returns and before fees).

Choosing the Right Fund

The most important factor in choosing a fund is your time horizon:

Years Until Retirement Recommended Fund Type Rationale
30+ years Aggressive Maximum time to recover from market downturns; maximize growth potential
20-30 years Growth Still long time horizon; can handle volatility for higher returns
10-20 years Balanced Balance between growth and stability; moderate risk
5-10 years Conservative Protect accumulated savings; reduce exposure to market crashes
0-5 years Defensive Preserve capital; ensure funds are available when needed
⚠️ Default Fund Alert

If you don't choose a fund, you'll be placed in a default fund (usually a conservative or balanced fund). This may not be appropriate for your age and circumstances. Many young people in default conservative funds are missing out on significant potential returns.

Switching Funds

You can change your fund type at any time by contacting your KiwiSaver provider. There's usually no fee for switching, and it's recommended to review your fund choice:

  • Every 5 years as you age
  • When major life events occur (marriage, children, career change)
  • When you're 10 years from retirement (consider moving to lower risk)
  • When you're 5 years from retirement (consider conservative options)

🔢 Real-World Examples

Let's explore some practical scenarios to see how KiwiSaver works in different situations.

1
Sarah, Age 25 - Starting Her Career

Situation: Sarah just started her first full-time job earning $55,000 per year. She's been auto-enrolled in KiwiSaver at 3% and placed in a default balanced fund.

Current Contributions:

Sarah's contribution (3%): $55,000 × 0.03 = $1,650/year
Employer contribution (3%): $55,000 × 0.03 = $1,650/year
Government contribution: $1,650 × 0.5 = $825 (capped at $521.43)
Total annual contributions: $1,650 + $1,650 + $521.43 = $3,821.43

What Sarah Should Consider:

  • Switch to aggressive fund: At 25, Sarah has 40 years until retirement. An aggressive fund would likely generate significantly higher returns over this timeframe.
  • Increase contribution rate: If Sarah can afford it, increasing to 4% or 6% would maximize her employer match and boost long-term savings.
  • Projected retirement balance (at 65):
    • In balanced fund (6% return): ~$486,000
    • In aggressive fund (8% return): ~$822,000
    • Difference: $336,000 extra just from choosing the right fund!
Action Item: Sarah should contact her KiwiSaver provider immediately to switch to an aggressive fund and consider increasing her contribution rate to at least 4%.
2
James, Age 45 - Mid-Career Professional

Situation: James has been in KiwiSaver for 15 years, earning $85,000 annually. He's been contributing 4% to a growth fund and has accumulated $92,000. He's wondering if he should increase his contributions.

Current Situation:

James's contribution (4%): $85,000 × 0.04 = $3,400/year
Employer contribution (3%): $85,000 × 0.03 = $2,550/year
Government contribution: $3,400 × 0.5 = $1,700 (capped at $521.43)
Total annual contributions: $3,400 + $2,550 + $521.43 = $6,471.43

If James Increases to 6%:

James's contribution (6%): $85,000 × 0.06 = $5,100/year
Employer contribution (3%): $85,000 × 0.03 = $2,550/year (unchanged)
Government contribution: Still capped at $521.43
Total annual contributions: $5,100 + $2,550 + $521.43 = $8,171.43
Additional personal contribution: $5,100 - $3,400 = $1,700/year

20-Year Projection (to age 65):

  • Current balance: $92,000
  • At 4% contribution (growth fund, 7% return): ~$542,000
  • At 6% contribution (growth fund, 7% return): ~$631,000
  • Difference: $89,000 more in retirement
💡 The Cost of Waiting

James has 20 years left until retirement. If he increases his contribution now, the extra $1,700 per year will compound significantly. Waiting even 5 years would reduce his retirement balance by approximately $30,000.

3
Maria & Tom - First Home Buyers

Situation: Maria (32) and Tom (34) have been in KiwiSaver for 7 and 9 years respectively. They're looking to buy their first home and want to understand their options.

Their KiwiSaver Balances:

  • Maria: $45,000
  • Tom: $58,000
  • Combined: $103,000

First Home Withdrawal Rules:

  • Both have been members for 3+ years ✓
  • Must be buying their first home ✓
  • Must leave minimum $1,000 in KiwiSaver
  • Can withdraw contributions + employer contributions + investment returns
  • Cannot withdraw government contributions (these must stay for retirement)
Estimated government contributions (Maria): ~$3,500
Estimated government contributions (Tom): ~$4,500
Available for withdrawal (Maria): $45,000 - $3,500 - $1,000 = $40,500
Available for withdrawal (Tom): $58,000 - $4,500 - $1,000 = $52,500
Total available for deposit: $93,000

HomeStart Grant Eligibility:

They're also eligible for the First Home Grant (formerly HomeStart Grant):

  • Maria (7 years): $5,000 (existing home) or $10,000 (new build)
  • Tom (9 years): $5,000 (existing home) or $10,000 (new build)
  • Combined grant: $10,000 (existing) or $20,000 (new build)
Total deposit available:
- Existing home: $93,000 + $10,000 = $103,000
- New build: $93,000 + $20,000 = $113,000
⚠️ Important Considerations

While withdrawing KiwiSaver for a first home can help get on the property ladder, Maria and Tom should consider:

  • They'll lose approximately 25 years of compound returns on the withdrawn amount
  • $93,000 invested until retirement could grow to $600,000+ (at 7% annual return)
  • They need to balance homeownership goals with retirement savings
  • After withdrawal, they should maximize contributions to rebuild their retirement savings
4
Linda, Age 58 - Approaching Retirement

Situation: Linda plans to retire at 65. She's been in KiwiSaver since it began in 2007, contributing 6% throughout. She has $185,000 in a growth fund and is wondering about her strategy for the next 7 years.

Current Annual Contributions:

Salary: $72,000
Linda's contribution (6%): $4,320/year
Employer contribution (3%): $2,160/year
Government contribution: $521.43/year
Total annual contributions: $7,001.43

Strategy Recommendations:

Years 1-2 (Age 58-59): Stay in growth fund

  • Still enough time to recover from any market downturn
  • Maximize growth potential

Years 3-4 (Age 60-61): Switch to balanced fund

  • Reduce exposure to market volatility
  • Start protecting accumulated wealth

Years 5-7 (Age 62-65): Move to conservative fund

  • Preserve capital as retirement approaches
  • Ensure funds are available when needed

Projected Retirement Balance:

Current balance: $185,000
7 years of contributions: ~$49,010
Investment returns (avg 5.5%): ~$85,000
Projected balance at 65: ~$319,000
Retirement Income: At 65, Linda can access her KiwiSaver. If she withdraws $25,000 per year and her remaining balance earns 4% annually, her KiwiSaver could provide supplemental income for approximately 15 years, on top of New Zealand Superannuation.
5
David - Self-Employed Contractor

Situation: David (38) is self-employed as a building contractor. He joined KiwiSaver voluntarily 5 years ago and makes contributions when he can afford them. He's wondering how to optimize his retirement savings.

Current Situation:

  • Average annual income: $95,000 (varies by project)
  • Current KiwiSaver balance: $28,000
  • Irregular contributions: ~$1,500/year average
  • No employer contributions (self-employed)

Challenge:

Current contribution: $1,500/year
Government contribution: $1,500 × 0.5 = $750 (capped at $521.43)
Total: $2,021.43/year
Missing out on potential employer contribution: $2,850/year (3% of $95,000)

Optimized Strategy:

Option 1: Maximize Government Contribution

Set up automatic payment: $86.91/month ($1,042.92/year)
This ensures full government contribution: $521.43
Total annual: $1,564.35 for just $1,042.92 out of pocket
Effective return: 50% guaranteed!

Option 2: Self-Employed "Employer Match"

Treat 6% of income as combined employee + employer contribution
$95,000 × 0.06 = $5,700/year
Plus government contribution: $521.43
Total annual: $6,221.43
💡 Tax Benefits for Self-Employed

While self-employed individuals don't get employer contributions, KiwiSaver contributions can be claimed as a business expense in some situations. David should consult with an accountant about structuring his business to maximize tax benefits and KiwiSaver contributions.

27-Year Projection (to age 65):

  • Current path ($1,500/year): ~$178,000
  • Option 1 ($1,042.92/year): ~$158,000
  • Option 2 ($5,700/year): ~$531,000
  • Difference: Option 2 provides $353,000 more at retirement
Recommended Action: David should aim for Option 2 when cashflow permits, but at minimum should commit to Option 1 to maximize the government contribution. Setting up an automatic monthly payment ensures consistency and removes the temptation to skip contributions during busy periods.

🎯 Test Your Knowledge

Complete this 10-question quiz to assess your understanding of KiwiSaver fundamentals

1. What is the minimum employee contribution rate for KiwiSaver?
2% of gross salary
3% of gross salary
4% of gross salary
5% of gross salary
2. What is the maximum annual government contribution (Member Tax Credit) you can receive?
$1,042.86
$521.43
$1,000
$2,084.72
3. How much do you need to contribute annually to receive the maximum government contribution?
$521.43
At least $1,042.86
$2,000
$3,000
4. What is the minimum employer contribution rate for employees in KiwiSaver?
2% of gross salary
3% of gross salary
Employers are not required to contribute
Matches the employee's contribution rate
5. Which fund type would typically be most suitable for a 25-year-old starting their career?
Defensive/Conservative
Conservative
Balanced
Growth or Aggressive
6. At what age can you normally withdraw your KiwiSaver funds for retirement?
60 years old
63 years old
65 years old
67 years old
7. Can you withdraw your KiwiSaver funds to buy your first home?
No, KiwiSaver can only be withdrawn at retirement
Yes, after being a member for 3 years, with some restrictions
Yes, but only after being a member for 10 years
Yes, but you can only withdraw 50% of your balance
8. How long must you be a KiwiSaver member before you can take a contributions holiday?
6 months
12 months
2 years
5 years
9. What happens to employer contributions during a contributions holiday?
Employer continues to contribute as normal
Employer contributions are reduced by 50%
Employer contributions stop during the holiday
Employer contributions are held in reserve until you resume
10. Which of the following statements about KiwiSaver is TRUE?
KiwiSaver is mandatory for all New Zealand workers
You cannot change your contribution rate once you've chosen it
The government contribution effectively provides a 50% return on your contributions up to $1,042.86
Self-employed people cannot join KiwiSaver

🧮 Try KiwiSaver Calculator

If you've found a bug, or would like to contact us please click here.

Calculate.co.nz is partnered with Interest.co.nz for New Zealand's highest quality calculators and financial analysis.

© 2019–2025 Calculate.co.nz. All rights reserved.
All content on this website, including calculators, tools, source code, and design, is protected under the Copyright Act 1994 (New Zealand). No part of this site may be reproduced, copied, distributed, stored, or used in any form without prior written permission from the owner.
All calculators and tools are provided for educational and indicative purposes only and do not constitute financial advice.
Calculate.co.nz is part of the realtor.co.nz, GST Calculator, GST.co.nz, and PAYE Calculator group.
Calculate.co.nz is also partnered with Health Based Building and Premium Homes to promote informed choices that lead to better long-term outcomes for Kiwi households.