FINANCE: What Is The KiwiSaver Scheme & How To Invest In It?

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The KiwiSaver Scheme is an initiative designed to help New Zealanders secure a more stable financial future. Introduced in 2007, the program encourages residents to save for their retirement with support from their employers and the government. This voluntary, work-based savings scheme has since seen significant enrollment, and many are realizing the benefits it can offer in their golden years. But what exactly is the KiwiSaver Scheme, and how does it work? Here’s a deep dive into this impactful program.

Key Features of the KiwiSaver Scheme

  • Voluntary Participation: While it’s automatic for new employees, participation in the KiwiSaver Scheme is voluntary. This means individuals have the choice to opt-out if they decide it’s not for them.
  • Contributions: Members contribute a chosen percentage (typically 3%, 4%, 6%, 8% or 10%) of their gross salary or wages to their KiwiSaver account. This is then matched by their employers with a minimum contribution of 3%.
  • Government Contributions: On top of the individual and employer contributions, the government also chips in with an annual contribution to eligible members, known as the Member Tax Credit. This is essentially a monetary boost to help increase members’ savings.
  • Flexible Savings: The primary objective is retirement savings. However, the funds can also be used for specific purposes before retirement, like buying a first home.
  • Investment Choices: Unlike a fixed savings account, KiwiSaver funds are invested in a range of assets like shares, property, and bonds, depending on the chosen fund type. This allows members to potentially grow their savings at a higher rate than traditional savings accounts.

Benefits of Joining the KiwiSaver Scheme

  • Compounded Growth: With regular contributions from the employee, employer, and the government’s annual input, members can benefit from compounded growth over the years. This means the earlier one starts, the more they benefit in the long run.
  • First Home Purchase: One of the standout features is the ability for members to withdraw their savings to buy a first home. Eligible members can also apply for a KiwiSaver HomeStart grant, provided by Housing New Zealand, which offers even more financial assistance for first-time home buyers.
  • Diverse Investment Options: Members can choose where their money gets invested. There are different fund types, ranging from conservative to aggressive, based on one’s risk appetite. This customization lets individuals decide how they want their savings to grow.
  • Retirement Security: At the age of 65 (the default retirement age for KiwiSaver), members can access their funds. For many, this provides a financial cushion in addition to the New Zealand Superannuation, ensuring a more comfortable retirement.

Some Considerations

While the KiwiSaver scheme is undoubtedly beneficial for many, it’s crucial to remember that like all investments, there’s a risk involved. The returns aren’t guaranteed and depend on the market’s performance and the chosen fund type.

It’s also essential to review and possibly switch funds as life situations and risk appetites change. An aggressive fund might be suitable for a young individual who can tolerate higher risk, but as one nears retirement, they might want to consider switching to a more conservative fund.

Since its inception in 2007, the KiwiSaver scheme has generally been lauded for encouraging New Zealanders to save for their retirement. However, like many government initiatives, it hasn’t been without controversy. Here are some of the main points of contention associated with the KiwiSaver scheme:

  • Ethical Investments: One of the primary controversies has been around where KiwiSaver funds invest their money. Reports revealed that some of the KiwiSaver funds were invested in companies involved in weapons manufacturing, fossil fuels, and tobacco. This sparked a debate on ethical investing and led some providers to review and change their investment strategies.
  • Taxation Issues: Concerns have been raised about the tax treatment of KiwiSaver, particularly the taxation of the fund’s returns. Some argue that this potentially reduces the scheme’s effectiveness in building retirement savings, especially when compared to housing, which has more favorable tax treatment.
  • First Home Withdrawals: The provision allowing members to withdraw their savings for a first home purchase has been both praised and criticized. Some believe it undermines the primary goal of the scheme – to save for retirement. Others feel it inflates housing prices, especially with the addition of the HomeStart Grant.
  • Inequality Concerns: There have been concerns that the scheme disproportionately benefits higher-income earners who can afford to contribute more, and thereby receive higher employer and government contributions. Lower-income earners, especially those in part-time employment or with inconsistent employment history, may not derive the same level of benefits.
  • Default Provider Issues: New enrollees who don’t choose a fund get automatically placed into one of the default conservative funds. While these funds are generally lower risk, they can also offer lower returns over the long term. There are concerns that many members remain in these default funds and potentially miss out on higher returns from other fund types.
  • Age Restrictions: Originally, people over the age of 65 could not join KiwiSaver, and existing members over this age could not receive employer contributions. Though some of these regulations have changed over time, they were initially sources of contention.
  • Transparency: Some critics have pointed out a lack of transparency in the fee structures and performances of different KiwiSaver providers. This can make it challenging for members to make informed decisions about which fund to choose.


The KiwiSaver Scheme has revolutionized the way New Zealanders save for retirement. With its multifaceted approach involving individual, employer, and government contributions, it offers a unique opportunity for residents to cultivate a significant nest egg for their future.

In conclusion, while the KiwiSaver scheme has provided many New Zealanders with a structured way to save for retirement, it’s essential to be aware of the concerns and controversies surrounding it. Potential members and existing ones should do their research, regularly review their contributions and fund choice, and consider seeking financial advice to make the most of the scheme.

(Source: KiwiSaver. Disclaimer: Please note that the information provided herein is for general informational purposes only and does not constitute financial, investment, tax, legal, or other forms of advice.)