KiwiSaver....What Does It Mean....How Does It Work

The KiwiSaver Initiative to be implemented by the government on 1 July 2007 is a voluntary savings initiative.


The key points of the scheme are as follows:

·     New Employees are automatically enrolled in KiwiSaver, but can ‘opt out’ in the first two to eight weeks of employment.

     Existing Employees have the option to ‘opt in’ to the scheme, but this is not compulsory.

  • Employers are responsible for deducting contributions from the first payday and forwarding them to the IRD together with PAYE.
  • Those Employees that choose to participate in the scheme can opt to contribute 2%, 4% or 8% of their gross wages including bonuses, commissions, extra salary and overtime.
  • The compulsory employer contribution has been set at 2% from 1 April 2009, regardless of the contribution rate that the employee chooses. The employer contribution is only compulsory as long as the employee elects to be in Kiwisaver.
  • Effective from 1 July 2007 a new tax credit for KiwiSaver members will be available of up to $1,042.86 a year ($20 a week).
  • New members receive a $1,000 Government contribution, free of tax and gift duty after 3 months of membership.
  • Employees can select their own investment product, be placed in their Employers preferred scheme, or be allocated to a ‘default provider’.
  • Savings are locked in until 65, except in cases of serious financial hardship, illness, permanent emigration or to contribute towards a first-home deposit.
  • After being a KiwiSaver member for 12 months up to half of a person’s KiwiSaver contribution can go towards paying off the mortgage on their home. The rest of the contribution goes into a KiwiSaver account.  This contribution must be on your main home and contributions diverted to the mortgage do not qualify for a member tax credit.  Please note; not all scheme or mortgage providers offer this, so please check with the provider first.
  • Contributions can be stopped by the member after 12 months, for up to 5 years at a time.
  • After 3 years contribution, a one off withdrawal can be made towards a deposit on a first home.
  • A first-home buyer’s subsidy of up to $5,000 may be available to qualifying members after three years.
  • Self employed people are not automatically enrolled in the KiwiSaver Scheme.  If you are self employed and wish to opt into the scheme you must choose a scheme provider and contact them directly.  You and the scheme provider will decide on a contribution amount.  If a KiwiSaver scheme or complying superannuation fund is chosen, you will still receive the KiwiSaver benefits.


As an Employer, you will be responsible for educating your staff on this scheme and providing the tools for the Employee to opt in or out of the scheme. Your main responsibilities will include:

·    Giving new employees a KiwiSaver information pack (supplied by the IRD) within 7 days of a new employee starting employment.

  • Automatically enrol and give the IRD names, IRD numbers and addresses of all new employees and those who want to join KiwiSaver, using a new form (KiwiSaver Enrolment Details (KS 1) that is sent to the IRD monthly with the PAYE monthly schedule.
  • Deducting employees’ contributions from their before tax pay and forwarding them to the IRD along with their PAYE (unless advice is received from the IRD that a new employee has opted out).
  • Ensuring new employee’s contributions start from their first pay.
  • Refunding any contributions deducted if they haven’t been passed into the IRD when an employee opts out of KiwiSaver.
  • Providing investment statements for all employees if the employer has chosen a preferred KiwiSaver scheme.
  • Keeping the required KiwiSaver records.
  • From 1 July 2007 all KiwiSaver employer contributions must be made through IRD and cannot be made direct to KiwiSaver scheme providers.


* A complying superannuation fund is a section within a superannuation scheme that has been approved by the Government actuary as having met certain criteria similar to KiwiSaver.

Please note, this is a brief overview of what is becoming a very comprehensive initiative.  If you think KiwiSaver applies to you or you would like some more information we recommend you contact us to discuss this initiative further or you can request a detailed guide published by the IRD.  Alternatively, you can go to the Government website

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