Is KiwiSaver for you?

How you benefit from KiwiSaver depends on your own personal situation.

See the section most relevant to you:

District Health Board employees

Those who already have super

Society Members with Retirement Savings Plan

Business owners

First home buyers

Family members

District Health Board employees

You may qualify for employer-subsidised super of 6% of your before-tax salary every year. On a $100,000 salary, that’s an extra $6,000 a year (before tax). And you get to keep more of this extra income by dividing your savings and putting some into KiwiSaver. Here’s how:

How to maximise the financial benefits

Employer contributions to super funds are usually taxed. But with KiwiSaver, all employer contributions of up to 4% of your before-tax salary are totally tax free (dropping to 2% from 1 April 2009), as long as you’re making at least matching contributions to your KiwiSaver account. This means any contribution your employer makes (up to 4%) is yours to keep, helping your savings grow faster.

So if you match the the District Health Board’s (DHB’) 6% contribution with your own 6% contribution here’s how you may be able to structure your total 12% contribution to maximise the tax benefits of KiwiSaver (assuming your employer allows this arrangement):

4% invested in KiwiSaver
= 2% from DHB (tax free) + 2% from you

8% invested in standard super scheme
= 4% from DHB (taxed at 33%*) + 4% from you.

So, on a $100,000 salary and 6% DHB contribution you get:

• An extra $4,680 in contributions each year – if you don’t already have a super fund going, or

• An extra $660 in contributions each year – if you already have a super fund going.

It’s like getting a pay-rise! And these figures don’t even include the other financial benefits KiwiSaver offers, like the $1,000 kick-start payment and the Government’s matching payments of up to $1040.

See how the calculations were made.

* Contributions to super funds are subject to Employer Superannuation Contribution Tax of 33% for salaries of more than $57,601.

Those who already have a super scheme

Because KiwiSaver and other super funds offer different advantages, it may be better for you to keep your existing scheme going and divert your future contributions to KiwiSaver. That way, you get the best of both worlds by taking advantage of the financial rewards KiwiSaver has to offer and still have access to some of your money earlier (as most standard super funds can be accessed between 50 and 60 years of age).

How to maximise the financial benefits

With KiwiSaver, employer contributions of up to 2% of your before-tax salary are totally tax free, as long as you’re making at least matching contributions to your KiwiSaver account. This means any contribution your employer makes (up to 2%) is yours to keep, helping your savings grow faster.

So if your employer currently subsidises 2% of your before-tax salary and you match this with your own 2% contribution, on a $100,000 salary you get:

• An extra $2,000 in contributions each year – if you don’t already have a super fund going, or

• An extra $660 in contributions each year – if you already have a super fund going*.

It’s like getting a pay-rise! And these figures don’t even include the other financial benefits KiwiSaver offers, like the $1,000 kick-start payment and $57,601 the Government’s matching payments of up to $1040 a year.

* Contributions to super funds are subject to Employer Superannuation Contribution Tax. This is a tiered rate, capped at tax of 33% for salaries of more than $57,601.

Members with a Society Retirement Savings Plan

Congratulations on having a Retirement Savings Plan (RSP) with us. It means you are well on your way to making your life so much easier when it’s time to stop working.

The main differences between your RSP and KiwiSaver are:

• RSP is locked in until you turn 55 while KiwiSaver is locked in until you turn 65 (except for first home buyers and those with special circumstances like financial hardship)

• RSP allows for joint accounts – KiwiSaver doesn’t

• With RSP you can contribute as much or as little as you like, while KiwiSaver has a prescribed contribution rate of either 2%, 4% or 8% (although you could make contributions of higher than 8% by contacting your KiwiSaver provider direct)

• KiwiSaver has extra benefits, such as:
  • $1,000 kick-start payment from the Government
  • Up to $1040 a year from the Government to match your own contributions
  • 1% to 2% compulsory employer contributions
  • Tax savings through employer-subsidised super
  • The ability to withdraw from KiwiSaver to pay for a deposit on your first home as well as a first home subsidy of up to $5,000 (if you qualify).

Get the best of both worlds

Because RSP and KiwiSaver have different benefits, it may be best to keep your existing RSP and divert your future contributions to KiwiSaver. This will allow you to keep a fund that you can access when you turn 55 and at the same time reap the extra financial benefits KiwiSaver has to offer.

By diverting your future contributions to KiwiSaver here’s how much extra you could save each year on a $100,000 salary:

Business owners

You can join KiwiSaver simply by opening an account directly with your Society.

If you’re a sole trader or self-employed, KiwiSaver works differently for you – instead of having to contribute either 2%, 4% or 8% of your before-tax salary, there’s no prescribed amount so you can contribute as much or as little as you like. You won’t qualify for the tax savings through employer contributions, but you will qualify for the $1,000 kick-start payment, the $1040 matching contributions from the Government and perhaps even the first home benefits, depending on your situation.

Maximise financial benefits

If your business is a trading trust, company or partnership – and you have an employee-employer relationship with your business – you can take advantage of the financial benefits KiwiSaver has to offer, just like other employees.

You could also pay yourself employer contributions to match your own savings – and get your employer contributions tax free.

Making your savings work

If your salary as an employee is $100,000, here’s how you could maximise the benefits of tax-free employer contributions:

• You contribute 2% ($2,000) towards your KiwiSaver account each year.

• You get a tax credit from the Government of up to $1,040 a year

• You match your employee contribution with a 2% ($2,000) employer contribution tax free

• This provides the same benefits as the table above.

These tax savings are not available to those who are self-employed or sole traders.

First home buyers

KiwiSaver can really make it easier for you to buy your first home. So if you’re thinking of buying your first home in the near future, now’s a great time to join KiwiSaver. That way, you start accumulating the benefits early, so by the time you’re ready to buy your first home, the money’s there waiting for you.

KiwiSaver benefits first home buyers in three ways:

1. You can make a withdrawal from your KiwiSaver account and put the money towards a deposit on your first home.
2. You may also be able to get up to $5,000 from the Government to help pay for your first home, if you qualify.
3. When you’ve bought your home you can divert up to half of your regular KiwiSaver contributions towards your home loan to help pay off the loan faster.

Withdrawal for your first home

After three years of contributing to KiwiSaver you can make a one-off withdrawal from your account and put the money towards a deposit on your first home. You can withdraw as much as you like, but you’ll need to keep the $1,000 kick-start payment and the government’s matching contributions in your KiwiSaver account so that your savings continue to grow.

First home subsidy

You may also qualify for a first home subsidy of $1,000 a year for the first five years of saving with KiwiSaver. After three years of saving you can use the subsidy you’ve accumulated for a deposit on your first home. The money is paid to your KiwiSaver provider who will pass the money to you.

With KiwiSaver you could also combine your first home subsidy with other KiwiSaver members to increase your deposit on a joint first home – for a couple that’s up to $10,000 in subsidies.

To qualify for the first home subsidy, you need to plan to live in the house for six months or more, and the house has to be under the price limits set by the Government. The price limits are currently $400,000 for higher-priced areas such as Auckland City, North Shore City and the Queenstown Lakes District, and $300,000 for the rest of New Zealand.

There are also household income limits. These are:

• $100,000 a year or less for one or two KiwiSaver members living together

• $140,000 a year or less for three or more KiwiSaver members living together.

This criteria will be reviewed and confirmed closer to the time KiwiSaver members start qualifying for this benefit.

Family members

KiwiSaver can benefit your family members too. It doesn’t matter whether or not they are working:

Children and grandchildren

Partners and spouses

Children and grandchildren

KiwiSaver is a great way for your children or grandchildren to save for their future, whatever their age. They can open a KiwiSaver account and start getting the financial benefits of KiwiSaver straight away. By starting early here’s how your children or grandchildren will get ahead:

• $1,000 kick-start payment to get their savings going, with investments accumulating for longer.

• First home subsidy of $1,000 a year for the first five years (if they qualify), plus the ability to withdraw from their KiwiSaver account for a first-home deposit after three years of contributing. Starting early means the first home benefits accumulate early, so by the time your children are ready to buy their first home, the money’s there for them and there’s no need to wait.

• Getting your children into the savings habit early will also teach them the basics of managing money before they start working – important life skills that will guide them in their financial future.

Then when they’re working they can contribute to KiwiSaver through their workplace and enjoy tax-free employer contributions as well. From age 18 they can also take advantage of the other financial benefits of KiwiSaver, such as the government’s matching contributions of up to $1040 a year, boosting their savings even further.

Joining KiwiSaver

Your children won’t be able to join KiwiSaver through your workplace, but they can join by contacting the Society direct.

With a Medical Assurance Society KiwiSaver Plan there’s no minimum contribution amount for those who are not working so there’s less pressure for you to regularly contribute to your children’s accounts.

Your children will need an IRD number to join KiwiSaver – you can apply for one by filling in an IR595 form and sending it to Inland Revenue. Once your children have an IRD number give us a call on 0800 800 MAS (627) and we’ll set them up with their own KiwiSaver accounts.

Partners and spouses

Whether or not your partner is working, they too can benefit from KiwiSaver.
As soon as they open their KiwiSaver account they start accumulating savings of their own:

• $1,000 kick-start payment

• Up to $1040 a year from the Government to match their own contributions

• Up to $5,000 for their first home, if they qualify.

Plus, if they’re working, they get all the other financial benefits of KiwiSaver, like the compulsory employer contributions. They can join KiwiSaver either directly through us (they don’t have to be a health professional to have a Society KiwiSaver account) or through their employer.

If your partner’s not working we’ll be happy to set them up with a KiwiSaver plan.