13 June 2016
Reading time: 7 minutes
Posted by Tom Hartmann,
68 comments
How does KiwiSaver work? Many questions tend to crop up around KiwiSaver, so we've put together a list of hits and myths in this KiwiSaver FAQ.
You might be wondering: what's the point of joining KiwiSaver? These are the main benefits of KiwiSaver:
Nope. Think of your KiwiSaver account like a bank account. Nobody else can touch your individual KiwiSaver account – it’s in your name and it’s your money.
The government – through Inland Revenue – has set up KiwiSaver and makes sure that the money you put in (and any KiwiSaver employer contributions) goes into your account.
The government also adds to your KiwiSaver account when it matches the money you put in, up to $260 each year. But that money is yours and cannot be taken back by the government.
It goes into your KiwiSaver account, which is part of a larger fund managed by a private KiwiSaver provider. Your provider then invests your money into different assets like cash, shares, fixed interest and property, depending on the type of fund you have chosen.
Everyone needs to choose which fund to be in. If you didn’t choose when you started in KiwiSaver, the government did this for you by putting you into a “default” fund. This was to get you started, until you got around to making a choice yourself.
To learn more about the fund you are in today, or what other options are available, have a look at our KiwiSaver fund finder. It’s designed to offer you an easy way to compare what you have today with other options on the market.
The exact mix of investments that your money goes into will depend on what type of fund you’re in – defensive, conservative, balanced, growth or aggressive. So it’s important to choose the right type of fund for your situation, and the fund finder can help you find a type that suits.
KiwiSaver schemes are trusts – so your money is tucked away in a trust and stays yours. That means if a KiwiSaver provider’s business were to fall over, your investments wouldn’t be affected.
All KiwiSaver providers are regulated by the Financial Markets Authority and have independent supervisors that monitor the actions of fund managers.
Basically, you need to put money into your KiwiSaver account – that’s it. For every dollar you put in (as long as you’re between 16 and 64) the government will match it with 25 cents, up to a maximum of $260.
So to get that full boost each year, you’d need to put in at least $1043. That works out to roughly $20 a week. Anyone earning $30,000 or more and putting in 3.5% is already doing this, and will get the full KiwiSaver government contribution amount automatically.
However, if you earn less than that as an employee, or if you're self-employed and aren't regularly contributing, you will need to top up your KiwiSaver account to get the full amount.
But even putting in less than $1043 is worth it – the government will still match that 25 cents on the dollar. So for example, if you put in $400, you’ll get an extra $100.
When you first join KiwiSaver there is a bit of a delay, as Inland Revenue must hold your contributions for three months from the date of your first contribution before transferring them to your KiwiSaver provider.
Although your KiwiSaver contributions are deducted each payday, it can take up to three months for them to reach your KiwiSaver account. Your employer first sends them to Inland Revenue, which checks that everything is correct. Inland Revenue then transfers the funds to your provider, including any interest earned during that time.
Because your money is in an investment fund, it can go up and down in value, so you can lose money. Ups and downs in the market are par for the course.
It’s also important to know that KiwiSaver funds are not guaranteed by the government.
That said, particularly because of all the money going into the fund from you, your employer and the government, it would be very difficult to lose all your money in KiwiSaver. It’s designed to keep growing.
Theoretically, you could lose it all – no investment is totally risk-free – but it would take a massive disaster for all markets to crash at the same time and permanently lose all their value. And at that point even bank accounts might not be any better off!
KiwiSaver funds, like all managed funds, are designed to spread your risks. They don’t typically concentrate all your money in one investment, but split it among many investments, both in New Zealand and overseas.
Some kinds of investments, such as shares and property, come with more risk. You can dial your risk up or down by choosing a type of fund that has more or less of these.
Some investments will do well, others less well, but in the long run the aim is that they will grow your money over time.
KiwiSaver has gone through some changes since its introduction and it’s impossible to predict what might happen in the future. Those who joined KiwiSaver before 2015, for example, got a $1000 kick-start from the government to join, which has since been removed. That said, KiwiSaver is part of the New Zealand landscape now and it would be very hard to make massive changes to it.
Yep. Your KiwiSaver money is for you on top of what you’ll get from NZ Super (not instead of). Being a KiwiSaver member does not affect your eligibility for superannuation or reduce the amount you currently receive.
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Comments (10)
Comments
Sarah | 19 April 26
Hello, I am 49 and am just about to start a kiwisaver account, I have a question I cannot find the answer to online:
Does the government only contribute for a certain number of years? e.g 5 years and that's all? Or do they keep on contributing until I am 65? AI. was saying that if you join late they only contribute for 5 years and then stop but I couldn't find this on any of the web pages they said it was from.
Thankyou! (-:
Tom from Sorted | 20 April 26
Thanks Sarah, that's a good example of a hallucination, as the government contribution is available for those aged 16-64 and can be received in all of those years.
Anonymous | 27 August 25
Question really. Can ones investment earnings be counted as contributions.
Tom from Sorted | 30 March 26
I like to think of them as a contribution from the market! Over long periods, those returns will grow our funds more than anything else we put in. But they are more like increases in value.
Tom from Sorted | 10 January 25
Thanks for commenting. The government contribution of 50 cents on every dollar, to a maximum of $521 each year, is based on your contributions after 1 July and before 30 June. You will still be eligible for the government money in your new KiwiSaver account, which should pay into it around July 2025.
Anonymous | 10 January 25
Good morning, I has a question regarding government member tax credits.
I switched KiwiSaver providers in about October 2024. I have already added the approximately $1045 (via voluntary salary reductions, as per usual) into my previous KiwiSaver account after the 1st of July 2024 but before switching funds.
This considered, would I still be eligible for the $521 at about midway through the year 2025, just paid into my newly used KiwiSaver provider? I say this as I am presently not earning income, and some websites are not the best at explaining this process.
Tom from Sorted | 28 August 24
Yes!
Carla | 26 August 24
Can I join KiwiSaver and just put in about $1050 a year (so no employer contribution because I am already in an old Defence Govt scheme and NZDF already contributes to that)?
Tom from Sorted | 26 August 24
Thanks for commenting Betsy – it can definitely make sense, especially if you are still working and your employer contributes. But even if not, KiwiSaver funds are a highly regulated space and can offer low-cost options. And the typical restrictions of not being able to withdraw unless it is for a first home or retirement are no longer there, so you have all the flexibility you want. See our KiwiSaver fund finder under our tools to compare.
Betsy | 24 August 24
I was looking for information about starting a KiwiSaver fund after 65, but can't find anything yet and whether or not this makes sense to do given the other investment opportunities.
Aminah | 21 November 23
I would like to join kiwisaver but how
Is it an app ?
I can be tracking my account and having
Access to my account
Ohh yes it's a good idear to save with kiwisaver hope my money won't be hacked
And stolen
Stirling T Hebenstreit | 20 August 23
Excellent baseline performer for all who have the ability to contribute their services in New Zealand. As a new employee of a well-known company, the contribution becomes an essential retirement tool for; planning, security, the offsets, the travel, the lake! I’m extremely grateful for the new government in affording securities. Markets won’t crash! Too many smart people and the boss agree!
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