KiwiSaver: Can I pay less than 3pc?

It is not possible to join scheme and only pay in enough to get the full annual member payment of $521.43.

I am not in Kiwisaver as I can't afford to lose the minimum 3 per cent from my wages. But can I put in a smaller amount on my own, with no connection to my income and employer, and get a credit of up to $521.43?

First, good on you for looking carefully at all the ins and outs of KiwiSaver.

At its heart KiwiSaver is a workplace savings scheme with any contributions you make coming out of your pay and paid to the provider of your choice.

Currently the minimum amount you can contribute from your pay packet is 3 per cent, although it is possible to also contribute 4 per cent or 8 per cent of your pay.

Your employer will deduct this from your wages, along with any tax deductions like PAYE or student loan repayments, and send it to the IRD, who will check everything is in order with the deductions and pass it on to your KiwiSaver provider.

It is also possible to chip in a lump sum or regular payments on top of your contributions by dealing directly with your provider.

In fact, that is what you'd need to do if you were self-employed.

As you rightly point out, it isn't compulsory to join KiwiSaver so it is entirely up to you whether you want to join or not.

Generally you'd be automatically enrolled when starting a new job, in which case you have up to eight weeks to opt out of KiwiSaver, or you can join by filling in a KiwiSaver enrolment form at any time.

It is also possible to take a contributions holiday once you've been in KiwiSaver a year if you're feeling squeezed financially.

But can you join and only pay in enough to get the full annual member tax credit of $521.43?

"No," says Westpac's head of investment products, Nigel Jackson.

"While some employers are exempt, the vast majority are required to deduct KiwiSaver contributions from your pay.

"Under the KiwiSaver Act, your KiwiSaver provider is required to notify Inland Revenue when you join.

"Inland Revenue must then contact your employer and instruct them to start deducting your contributions from your pay," Jackson says.

Along with the $520 member tax credit, joining KiwiSaver will also give you the $1000 kick-start.

There is also the matching 3 per cent contribution from your employer to think about, although some employers choose to roll the employer contributions into your overall salary under a "total remuneration" package.

If you haven't purchased your own home then some of your KiwiSaver funds are available to help buy a home once you've been a member for three years, plus those on modest incomes can get up to $5000 of assistance towards a deposit through Housing New Zealand.

Housing New Zealand also runs the Welcome Home Loans, which aim to help those on modest incomes bridge the gap to the 20 per cent minimum deposit required now for a home loan.

It is possible to do some "back of the envelope" calculations using a couple of online tools: the IRD's PAYE/KiwiSaver deductions calculator and Sorted's KiwiSaver calculator.

The IRD's calculator will give you a figure for the amount you can expect to have deducted from your pay if you join KiwiSaver.

Sorted's calculator will give you an idea of what your KiwiSaver deductions could add up to when you hit retirement age.

It also works out for you how much could be available for a home purchase in three or five years' time.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the NZ Herald's panel of industry players email Helen Twose, helentwose@gmail.com.