It is easier for people to save consistently for their retirement when savings occur through the workplace. Because KiwiSaver is administered through the workplace, employers play an important role in the scheme and have a number of obligations.

How KiwiSaver works

People who are over 18 years (but under 65), and start a new job will be enrolled into KiwiSaver automatically (with some exceptions). As their employer, you will have to start making KiwiSaver deductions from their first pay and continue to do so unless the employee decides to opt out. New employees can only opt out of KiwiSaver during the opt out period which is any time from the end of week two through to the end of week eight after starting a new job.

Other employees can also choose to join KiwiSaver. To have deductions started, they simply sign up with the KiwiSaver scheme provider of their choice or tell you they want to opt in, and complete the appropriate form.

The Government contributes $1,000 to “kick-start” each member’s KiwiSaver account. The Government has also undertaken to match KiwiSaver members’ contributions to the value of $20 per week (approximately $1,040 per annum) via an annual tax credit. Each member is also able to receive a yearly Government contribution of $40 towards the fees charged by scheme providers.

Another feature of KiwiSaver is a deposit subsidy towards the purchase of a first home. This subsidy is $1,000 for each year that members have been contributing to the scheme, up to a maximum of $5,000. KiwiSaver members must have been saving for at least three years and must meet certain criteria in order to be eligible for this subsidy.

A member’s KiwiSaver savings are not accessible until the member reaches the age of eligibility for New Zealand Superannuation (currently 65) or five years after the first contribution, whichever is later. However there are some exceptions, such as in the case of significant financial hardship, death or serious illness, or permanent emigration (subject to specified terms and conditions). A member can also choose to take a ‘contributions holiday’ after one year of making contributions.

Once an employee is enrolled in KiwiSaver, an amount equal to 4% of their gross salary or wages (including bonuses, commission and overtime) will be deducted from each after-tax pay, unless they choose to contribute at the higher rate of 8%.

From 1 April 2008, as an employer you must also make contributions to your employees’ Kiwisaver accounts. The minimum contribution is currently 1% of your employee’s gross salary and this will increase by 1% per year so that by 1 April 2011 you will be matching your employees’ contributions of 4%. Employer contributions to KiwiSaver schemes need to be made through Inland Revenue.

To help offset the cost to employers of the scheme, all employers contributing to an employee’s KiwiSaver scheme will be eligible for a matching employer tax credit of up to $20 per week per employee from 1 April 2008. To minimise compliance costs, this will be paid to employers through the PAYE system by offsetting the credit against the employer’s contribution and other PAYE liabilities.

Please Contact Us for more information on how KiwiSaver works.

What options does my business have?

There are a number of options available to your business, depending on whether or not you have an existing workplace savings scheme in place. If you have an existing workplace scheme, you should seek advice on what KiwiSaver means for this scheme, and how it can be integrated into your business. We can help you work through these options and find a solution.

If you do not have an existing workplace scheme, you also have a variety of choices. Please Contact Us to find out more about the options available to you.
  

 

 

The information on this web page is a summary of KiwiSaver only and is believed to be accurate at the time of release (June 2007).  Please refer to www.kiwisaver.govt.nz