A curious sceptic's guide

Looking at KiwiSaver through the “Why should I?” lens.

Why bother with KiwiSaver?
KiwiSaver can seem like a bit of a shaky boat really. Over a relatively short period it has changed a lot, and now the government has canned the $1,000 kick-start for new sign-ups. When you consider the everyday demands on your financial reserves - mortgage/rent, study, family, bills, unexpected costs, life - you start to think, "Why bother with KiwiSaver? I need that money now."

In the great ocean that is your future, however, having a boat is better than not having a boat. What will you live on once you stop working?

Let's look at KiwiSaver through the "Why should I?" lens.

KiwiSaver can help if planning ahead isn't your strength
Your KiwiSaver contribution is deducted from your pay before you see it, and then locked down until you trot past the retirement marker at 65 years young (minus any dollars you've withdrawn for your first home). If, like most of us, you struggle to see past next year let alone the next thirty, this can be a valuable helping hand.

It's a relatively painless default with a positive outcome
A common concern is that contributing to KiwiSaver reduces your pay, making tight budgets even tighter. True, you'll need to get used to a slightly reduced default amount - but if you calculate the potential payoff at 65, that monthly payment starts to look well worth it.

There are, of course, fees that apply to KiwiSaver. You could pay a fixed membership fee, ranging from $0 to $60 per year (averaging about $32 per year). You may also pay a percentage of your KiwiSaver account balance-percentage fees tend to be higher in riskier investment portfolios, although that's not always the case. Providers may change their fees over time, and it's worth remembering that higher fees don't always equate to greater returns or better service.

Behind the scenes, experts grow your money
Your KiwiSaver account isn't a savings account - it's an investment account. Over time, financial experts manage and invest your money with the aim of earning you additional returns.

Since KiwiSaver is an investment, there's always a risk of losing money - no KiwiSaver scheme can offer a 100% guarantee against this happening.

As far as investments go, KiwiSaver comes with some good perks
For every dollar you contribute to KiwiSaver, the government will add 50 cents - up to $521 each year (these are called 'member tax credits') to your account. Your employer is also obligated to chip in and match the first 3% of contributions you make.

You have some control over how your KiwiSaver account works
You get to choose your KiwiSaver account provider, and you can change provider whenever you like. The contribution rate is up to you: 3%, 4% or 8% of your salary. Depending on the scheme, you may also have a say in how (and where) your money is invested.

After 12 months of contributing, if you happen to hit a financial rough patch you can put your contributions on hold. This is called a contributions holiday. You can stop your contributions for anywhere from three months to five years, and you can renew at any time, as often as you'd like. Your employer's contributions may halt during these holidays also.

You can dip into KiwiSaver to help buy your first home
If you've been contributing to your KiwiSaver account for three or more years, there are two ways you could gain extra dollars towards your first home purchase:

• Withdraw your money from your KiwiSaver account (everything except the $1,000 kick-start, if you opened your KiwiSaver account before 21 May 2015; and any funds transferred from a complying Australian superannuation fund). Note that you may be able to use the KiwiSaver first home withdrawal to pay the initial deposit in some circumstances.

• Get a KiwiSaver HomeStart grant. If you are buying an existing home, you could be eligible for $1,000 for each year you've been contributing - up to a maximum of $5,000. This means that if you're buying a house with a partner and you both qualify, you could get up to $10,000. If you are buying a newly built home or a proposed home off plans, you could be eligible for $2,000 for each year you've been contributing - up to a maximum of $10,000. This means that if you're buying a house with a partner and you both qualify, you could get up to $20,000. To be eligible, your income must be less than $80,000 per year (or combined $120,000 if buying with a partner), and you must live in the house for six months. For more information and an outline of full eligibility criteria check the Housing New Zealand website.


So there you go!
As with any investment, deciding on whether to join KiwiSaver ultimately has to be your decision. But knowing the pros and cons can empower you to set your future plans - whether that's retiring in style or buying a first home - on the right path.

More information
Check out more info on the KiwiSaver page on the Kiwibank website


Information contained in this article is correct at the date of publishing and is intended as general information only. This article does not take into account your financial situation and goals and is not personal advice. For advice about your particular circumstances, please contact an authorised financial adviser.