Even if it seems a long way off, it pays to plan for your retirement as early as possible. Most people end up relying on NZ Super (the government pension) and their own savings for income in retirement. How much you’ll need to save will depend on your own circumstances, but the sooner you start, the more you will have.
New Zealanders are living longer; life expectancies have risen 6 months each decade since 1945. The number of people in New Zealand aged 65 and over is expected to rise by 135% from 385,000 to 892,000 by the year 2031. The number of those aged 85 and over is expected to rise by 282% to over 250,000 by the year 2031.
The number of people aged over 65 will make up nearly 1/5 of New Zealand’s population by 2031. Perhaps the most sobering thought is that according to the latest facts and figures coming out of the USA, advances in medical science and improving standards of living means a child born today could live up to age 130.
To be eligible for NZ Super, you need to be aged 65 or over and be a legal resident of New Zealand.
You also need to have lived here for 10 years since age 20, with five of those years since you turned 50.
The level of NZ Super payments is set by the government each year. The rates are reviewed and adjusted to take into account any increases in the cost of living (inflation) and average wages.
The after-tax NZ Super rate for couples (who both qualify) is based on 66% of the ‘average ordinary time wage’ after tax. For single people, the after-tax NZ Super rate is around 40% of that average wage.
There has been recent change in 2015 with the removal of the $1000 kickstart.
Are you in the correct fund for your age?
Are you on the correct tax rate?
KIWISAVER is a voluntary, long-term retirement savings scheme, which aims to encourage the savings habits of New Zealanders, helping them to save for their retirement. You can choose to contribute 3, 4, 8 or 10% of your gross salary or wages, which your employer will then pass to Inland Revenue for investment in your chosen KIWISAVER scheme.
Since the first of April 2013 there has been changes to KIWISAVER, moving the employer contributions from 2% to 3%, and so therefore employee contributions move from 2% to 3%.
What do I contribute?
The contributions you make to KiwiSaver depend on your personal situation.
If you’re employed, you must contribute at least 3% of your before-tax pay each pay day.
If you’re self-employed and PAYE is deducted from your income, you must contribute at least 3% of your before-tax pay each pay day. You must also pay an employer contribution of 3% to your KiwiSaver account.
If you’re self-employed and don’t deduct PAYE from your income, you can contribute at any time and for any amount.
I’m not employed
You can contribute at any time and for any amount.
You can apply to stop contributions from your pay if you need to – but not until at least 12 months after your first KiwiSaver contribution is paid to Inland Revenue.
How do you join?
To join a KiwiSaver scheme, you must be:
- A New Zealand citizen or entitled to remain in New Zealand indefinitely.
- Living or normally living in New Zealand (subject to certain exceptions for state services workers).
- Under the qualifying age for New Zealand Superannuation (currently 65 years).
When can you withdraw your KiwiSaver savings?
You can withdraw savings from your KiwiSaver account when you’re 65 or older and you’ve been a member of KiwiSaver (or a complying superannuation fund) for at least five years. In limited circumstances, you may be able to withdraw some, or all, of your savings early.
What are the main benefits?
KiwiSaver’s main benefits are that it helps you to save for retirement and could help you buy your first home. As well as your savings, you may also receive:
- A HomeStart grant.
- The Government’s annual contribution.
- Your employer’s regular contributions.
How KiwiSaver can help you buy your first home
Once you’ve been a KiwiSaver member for three years, KiwiSaver has two features that can help you buy your first home in New Zealand.
First, you may be able to make an early withdrawal
You may be able to withdraw the total amount in your KiwiSaver account less $1,000 and any amount transferred from an Australian complying superannuation fund. The money you withdraw must be put towards your first home. You need to apply early as the money you withdraw must be paid directly to your New Zealand solicitor (or licensed conveyancer) before settlement.
Second, you may be eligible for a HomeStart grant
If you’ve been a regular contributor to KiwiSaver, you might also be eligible for a grant, to help you buy your first home. The amount of the grant depends on whether the home is existing or newly built. You could get:
$1,000 a year for each year you’ve been a KiwiSaver member, up to a maximum of $5,000 if your first home will be an existing home.
$2,000 a year for each year you’ve been a KiwiSaver member up to a maximum of $10,000 if your first home will be newly built.
The Government pays this directly to your New Zealand solicitor (or licensed conveyancer) on settlement day – it does not come out of your KiwiSaver account.
Some criteria apply, including limits on your income and the value of the house you intend to buy and requirements for a minimum deposit.
Government’s annual contribution
Are you eligible?
You won’t get the Government’s annual contribution if you:
- Are under 18.
- Are 65 or over and entitled to withdraw your savings.
- Do not live in New Zealand (although exceptions to this apply if you work in the state services or for certain charities).
- If you’re only eligible for part of a year, you’ll get part of the Government’s annual contribution. The calculation of the amount will be based on the number of days in the year you were eligible.
How can you get the maximum?
You need to contribute at least $1,042.86 a year (from 1 July to 30 June) to your KiwiSaver account to get the maximum Government annual contribution of $521.43. If you contribute less than $1,042.86, the Government’s annual contribution will still be 50 cents for every dollar you did contribute.
The contributions from your pay may not be enough to qualify for the maximum Government annual contribution if all of the following apply:
- You’re employed.
- You earn less than $35,000 a year (before tax).
- You contribute 3% to a KiwiSaver scheme and don’t make additional contributions.
You can make voluntary contributions at any time to help you qualify for the maximum Government annual contribution.