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"I do not earn PAYE income - can I join KiwiSaver?"

Yes.  If you do not earn income subject to PAYE, you can join KiwiSaver.  And, because you don’t earn PAYE income, you save only what you decide.  The 3% minimum rule for employees does not apply. 

If the person is 18 or older, and under the KiwiSaver Retirement Age and chooses to save, the government also pays $1 for each $2 saved up to $521.43 a year.  This is known as a “member tax credit”.  The full $521.43 is paid for a full year’s membership, if you save $1,042.86. There is no requirement to save $1,042.86 - you can save more (or less).  You do not receive any additional government tax credits if you save more. 

The amount of any savings is subject to any minimum of the KiwiSaver scheme provider you choose, but otherwise it is up to you.  SuperLife has no minimum contribution.  

 

Capturing the $521.43 annual MTC (member tax credit)

Having joined, if you can afford to save, you can maximise the governments MTC by saving the equivalent of $87 a month (i.e. $20 a week, $1,042.86 a year).  Whether you save at the level of $87 a month, or simply pay a single cheque in June each year for the full amount, depends on your preference, your cash flow and what is convenient.

The full $521.43 tax credit is not paid by the government in your first year unless you joined on 1 July.  KiwiSaver works on a 1 July to 30 June year and the tax credit is paid in the first year based on the number of days you have been in KiwiSaver.  In the first year of membership, to gain the maximum MTC you should save $87 times the number of months (and part months), you have been a member.

You can save more than $1,042.86 a year but remember (unless you are intending to buy your first home) your money is generally locked in until the New Zealand Superannuation age (currently age 65) or for a minimum period of 5 years if you join after age 60.  If you want to save more, it may be better to save it in SuperLife’s superannuation scheme and not in SuperLife’s KiwiSaver scheme.

 

Make your money work for you

You decide how your KiwiSaver Account is invested.  There is a range of options available, from cash to shares.  The SuperLife investment guide and SuperLife investment options will help you make a decision.

 

What might KiwiSaver be worth?

The example below looks at the build up of a KiwiSaver Account in the first few years, for a non-PAYE income earning person who pays $86.92 a month and chooses an investment option that earns 5% p.a. after tax and investment costs.

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Over the five years, the sample member saved $5,215 and accumulated wealth of $8,600 - not a bad investment.

 

Join now

To join SuperLife for KiwiSaver, complete a membership form available with the product disclosure statement.  You can also join online at www.SuperLife.co.nz.  You need to have your IRD number handy.  Alternatively, phone 0800 27 87 37.

If you wish to save on a regular basis, you should also complete a direct debit form.

 

Other information – buying a home

Withdrawal for your first home 

If you have never owned a house and buy your first home after at least 3 years’ membership of KiwiSaver, you can withdraw all of your KiwiSaver Account balance other than $1,000 to help buy your first home.  The 3 year test, is 3 years of membership, not 3 years of contributions. 

First home HomeStart grant

If you have never owned a house and will buy your first home in more than 3 years time, it may pay to contribute 3% of your income each year for at least 3 years.  This may qualify you for the additional HomeStart grant of $1,000 a year, for up to 5 years (i.e. $3,000, $4,000 or $5,000) to help buy your first home.  The $1,000 increases to $2,000 a year if it is a newly built house. 

The rules for the HomeStart grant require you to have saved approximately 3% of your income for 3 to 5 years.  The details are on the Housing NZ web site (http://www.hnzc.co.nz/).  

You become an employee (you earn PAYE income)

If you become an employee, then a different set of rules apply.  The main change is that you may be required to contribute a minimum of 3% of your taxable earnings to KiwiSaver. Your employer will need to pay the same amount on your behalf. However if you have been in KiwiSaver for 12 months you can choose not to contribute (called a “contributions holiday”). In this case, your employer also, is not required to contribute. You can still choose to save $87 per month to get the government’s maximum tax credit.  

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This is not a product disclosure statement for the purpose of the Financial Markets Conduct Act 2013. A product disclosure statement is available from SuperLife free of charge.