Welcome to the Consumer guide to KiwiSaver. Our guide will explain all you need to know about the KiwiSaver scheme.

KiwiSaver - New Zealand's voluntary work-based savings scheme - will take to the skies on the 1st of July. This regularly-updated guide will cover the ins and outs of KiwiSaver - how the scheme works, what happens to your money, and whether or not KiwiSaver may be right for you.

You can also use the KiwiSaver calculator to work out your contributions, and how much you'll have saved on retirement, if you decide to join the scheme.

What is KiwiSaver?

The government says KiwiSaver aims to make long-term savings part of the Kiwi landscape for people currently not saving enough for their retirement.

The scheme is administered by Inland Revenue, which collects members' contributions through the "pay as you earn" (PAYE) tax system. Contributions are then passed on to the member's chosen KiwiSaver scheme provider to be invested.

Most KiwiSaver schemes will be balanced managed funds - where your money is pooled and placed by a professional manager in a variety of investments (such as cash, shares, bonds, and property).

Why do we need it?

Our voluntary savings record is not good.

According to the Reserve Bank, households have actually been dis-saving (spending more than their disposable income) since the 1990s. New Zealand's household savings rate is the worst in the OECD - it's -7 percent, according to OECD figures. Reserve Bank figures put our savings even lower: at -14 percent of household income.

Our population's ageing and we're not saving as a nation, so each of us needs to get serious about retirement savings. Otherwise, according to economist Dr Gareth Morgan, "... it'll be milk arrowroots and mittens in Bluff for you".

KiwiSaver benefits

First-home subsidy
After three years of saving, KiwiSaver provides a first-home-deposit subsidy of $1000 each year you're with KiwiSaver, up to a maximum of $5000.

Not everyone will be eligible for the subsidy. There will be eligibility criteria (not yet available).

You can make a one-off withdrawal to put towards your first home after three years' saving with KiwiSaver.

Mortgage diversion
Some schemes may offer a mortgage-diversion option. After 12 months in the scheme, you can arrange for half of your regular contribution to go towards paying off the mortgage on your home. But this has to be your "main" home - not an investment property or holiday home. And your employer's contributions can't be used for mortgage diversion.

Fee subsidy
The government will pay fee subsidies every six months to the scheme provider. This subsidy will offset some (but not all) of the ongoing fees a provider will charge for managing your KiwiSaver account. The size of this subsidy is not yet known.

Article provided by www.consumer.org.nz

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