KiwiSaver Fact Sheet
KiwiSaver Fact Sheet
28 February 2006
KiwiSaver is a government-sponsored, work-based savings scheme that is part of a package of Government initiatives designed to increase New Zealanders’ level of savings. Other initiatives include:
- Introduction of the State Sector Retirement Savings Scheme, a voluntary savings scheme aimed specifically at state sector employees;
- Establishing the New Zealand Superannuation Fund (NZS), aimed at pre-funding the future cost to the government of NZS.
Key facts on the proposed KiwiSaver scheme:
- Participation is voluntary
- Employees are automatically enrolled when they begin a new job and have six weeks in which to opt out
- Contributions will start from the next pay day after week 11 with the employer
- Contributions are deducted from wages at a rate of 4 per cent of gross salary and wages before tax, unless the individual chooses to contribute at the higher rate of 8 per cent
- Those who do not specify an investment product are randomly allocated to a default scheme provider
- Savers can select their own investment product and can change scheme providers, but can only have one provider at any time
- Enrolment is not automatic for workers under 18, or for existing employees, but they can join if they wish – as can other people, such as beneficiaries and the self-employed, although the latter will have to make the payments to IRD or themselves to the provider directly.
- Savings are primarily for retirement and are locked in until the recipient reaches the age of eligibility for NZ Superannuation or for five years membership, whichever is the later, except in cases of financial hardship, permanent emigration or, after a minimum of three years, to contribute toward a deposit on a first home
- After 12 months of contributions to the KiwiSaver scheme, all individuals can stop contributions for up to five years at a time.
- Enrol new employees in KiwiSaver and existing employees who choose to opt in
- Deduct employees' contributions and forward them to the IRD along with PAYE.
The automatic enrolment provisions will not apply in workplaces where the employer is already running an approved work-based scheme that is portable, open to all new permanent (including part-time) employees, the minimum employee contribution combined with the maximum employer contribution is at least 4 per cent and any employer contributions vest fully in the employee within 5 years of the employee becoming a member of the scheme.
Employees whose employer is exempt from the automatic enrolment provisions will still be able to join KiwiSaver (by opting-in).
If an employer is merely acting as a conduit or passing on information about KiwiSaver to its employees, or selecting a preferred KiwSaver scheme for its employees, the employer will not be liable as an investment adviser or promoter under the investment advisers and securities legislation.
- Makes an $1000 kick-start contribution to each member’s account, to be locked in until the recipient is eligible for NZS or for five years of membership, whichever is the later
- Will make a contribution towards members’ fees
- Offers a first home deposit subsidy of $1000 per year of membership in the scheme, up to a maximum of $5000 for five years, to qualifying KiwiSaver members after at least three years of saving.
To minimise the compliance costs for employers, KiwiSaver will be administered by Inland Revenue which:
- Receives the contributions and channels them to the individual’s chosen investment product
- Collates and distributes information about the scheme to employers for distribution to employees
- Receives notification from employees wishing to opt out or take a contribution holiday and advises the employer accordingly.