Thinking about saving for retirement is tough, particularly if you have just started working and retiring seems forever away. But the earlier you start saving, the easier it becomes and the more money you will have to enjoy later on.
KiwiSaver is a voluntary scheme aimed at helping you save for retirement. You don’t have to join but you will be automatically enrolled in a KiwiSaver fund when you start work. You can choose from a wide range of providers and schemes. And thanks to new disclosure rules you can compare apples with apples when it comes to fees. All retail KiwiSaver funds have to report performance, fees, asset allocation and other matters in a simple and standardised way.
Before you choose a provider, consider how much risk you’re prepared to take. Some schemes play it safe to protect your capital while others take more risks to achieve growth. The type of investment you choose will depend on many factors, including how close you are to retiring.
There are five types of investment – defensive, conservative, balanced, aggressive and growth.
Fees can vary widely. High fees can eat into your savings and over 20 years or so a small difference in the percentage of fees charged can make a big difference to total savings.
Some schemes provide features such as first-home buyer assistance and the ability to invest lump sums.
If you join you’ll have to put in either three, four or eight percent of your before-tax pay into the scheme and leave it there until you’re 65. There are a few exceptions.
To help you save, the government gives you a tax-free kick-start of $1000 and also tax credit of up to just over $500 a year. Plus, your employer has to contribute at least three percent of your before-tax pay.
Make sure you get good financial advice before you decide which provider and type of investment suits you.
Sue Chetwin
CEO CONSUMER NZ
For more information:
Visit kiwisaver.govt.nz for access to KiwiSaver information, tools, forms, providers and schemes. Alternatively, call 0800 549 472. The site, which is operated by Inland Revenue, provides information for new and existing members.
