Coming in sixth in New Zealand’s trending topics, “KiwiSaver” is an initiative of the Fifth Labour Government of New Zealand which started its operations on July 2, 2007. KiwiSaver is a savings scheme with the purpose of providing retirement funds. The scheme is borne out of New Zealand’s poor average savings rate. Governed by different Acts of Parliament as well, the KiwiSaver Act 2006 was passed in September 2006.
New Zealand residents aged 18 to 65 years old are enrolled automatically in KiwiSaver, with a few exceptions. However, KiwiSaver members can choose to terminate his or her membership on days 14 to 56 after their employment. The scheme encourages New Zealand residents to save and the government provides them with tax free 1000 NZ dollars to jumpstart their account. Aside from this, government incentives include “tax credit” of up to NZ$1,042.86 annually. First home deposit subsidy is also a potential benefit when a NZ residents joins the scheme.
NZ residents under 18 years of age are considered children but they can join KiwiSaver if the family provider allows them to do so. The child should agree with the contributions put in by the provider. When the child reaches legal age and acquires employment, they must continue with the scheme and therefore their contribution. They, however, are not entitled to tax credits.
It is possible to access one’s contribution prior to retirement. A one off withdrawal to purchase a contributor’s first home, serious illness, serious financial difficulties are all viable reasons for withdrawal. Also included is absence from New Zealand for 12 months.
KiwiSavers can choose which approved saving scheme they decide to sign on to. Approved saving schemes produce varying results in terms of risk and return. Participants can only join one scheme at a time but can decide to change it anytime.
Self and unemployed participants may choose the amount they contribute as a KiwiSaver. Employed participants can opt for 2%, 4% or 8% of their gross pay.