Two new contribution rates
From 1 April 2019, two new employee KiwiSaver contribution rates of 6% and 10% are available. These are in addition to the existing rates of 3%, 4% and 8%. The minimum employer contribution remains at 3%. The gap between National Superannuation and the cost of living, even in retirement, is widening.
The new contribution rates provide a great opportunity to think about increasing your contribution rate to help you achieve your investing goals. To help you understand the potential benefits of increasing your KiwiSaver contributions, consider the cases of Oliver and Charlotte. Oliver is considering contributing at either 3% or 6% while Charlotte is trying to decide whether to contribute at 8% or 10%. The difference in outcome at age 65 is big – between $333,000 and $107,000 as illustrated below.
- Opening savings balance is nil.
- Employer contribution rate is 3%, less employer superannuation contribution tax.
- Annual fund returns (after fees and tax): Growth Fund: 5.2%, Balanced Fund: 4.5%
- Salary and therefore contributions increase at 1.8% p.a.
- There are no withdrawals during the term
If you’d like to increase your KiwiSaver contribution rate, fill out an IRD KS2 form and give it to your employer.
Members who currently split their contributions between the MAS KiwiSaver Plan and the MAS Retirement Savings Plan (RSP) can continue to do so. Remember that with RSP you are entitled to withdraw your balance at age 55. For KiwiSaver, you can typically withdraw when you qualify for New Zealand superannuation – currently age 65.
If you’d like help to plan your retirement savings, remember our advisers aren’t paid commission and as a benefit of membership their advice comes at no extra cost to you.