Booster: Your Guide to KiwiSaver, Part One
Hello investor! KiwiSaver is a great way to help you save for your first home or retirement. Here’s a guide to help you use it.
9 March 2022
It’s important to set up your KiwiSaver account so your money is working hard for you.
If you’re a KiwiSaver member, you’re already an investor, and it’s a great way to learn about money.
In coming issues, we’ll take you through everything you need to know about KiwiSaver and how it works, so you can make the most of your money. Let’s go!
What is KiwiSaver?
In New Zealand, once you turn 65 you're entitled to NZ Super. But it usually isn’t quite enough.
So the government set up KiwiSaver in 2007 to help us save for our retirement.
Even though the government set it up, it doesn’t manage KiwiSaver and it never has your money.
Instead, your KiwiSaver account is managed by a KiwiSaver scheme provider, sometimes a bank, and sometimes a licensed fund manager.
A KiwiSaver account isn’t like a bank account.
Your money is pooled with lots of other people’s money in a ‘fund’ and your provider invests it across a wide range of ‘assets’ such as shares, bonds and property, here and overseas.
Your money is held in trust and overseen by an independent, licensed supervisor, so if anything happens to a provider, your money is not affected.
What happens to my money?
Your KiwiSaver account is an investment account, which is like a basket containing lots of investments.
Your money might be invested in tiny parts of buildings, companies, services, councils, governments or utilities, like power companies. Some of it might be in a bank.
You and your employer put money into your KiwiSaver account each pay day and your scheme provider invests it into the fund you’ve chosen.
Because your money’s invested in things that move up and down in price every day, the value of your KiwiSaver account will also rise and fall, more or less depending on your fund choice.
But investing this way should gradually grow your wealth over time.
Which KiwiSaver provider?
When you first join KiwiSaver, if you don’t choose a provider or if your company does not have a relationship with one, you’ll be given one.
There are six of these ‘default’ providers chosen by the government.
The Inland Revenue Department randomly puts you with a default provider.
A default fund is meant to be a short-term holding fund to help you get started with KiwiSaver. This might not be the best fund for you to stay in long term.
The money that goes into your KiwiSaver account every pay day is invested whether it’s a good day for investments or not such a good day.
This is a good thing and it’s called dollar-cost averaging.
Sometimes your fund’s units will be worth more and sometimes less. It’s like buying them cheaply on sale one time and then having them cost you a bit more the next.
The same dollar amount automatically buys you more units when their prices are lower (and fewer when prices are higher).
Lots of little purchases also means you’re less likely to accidentally buy a whole lot at a high price or sell a whole lot at the bottom of the investment cycle.
If you contribute regularly, this means you’re not buying all of your units at the highest price.
Get your money moving
It’s easier than you think. There are four ways to grow your KiwiSaver account.
Your own money: Once you’ve joined KiwiSaver, choose a fund or funds to invest your money in and your employer will start paying it in for you from your wages or salary. You can contribute 3% 4%, 6%, 8% or 10% of your pay. Or put in lump sums if you’re self-employed or just keen.
Your employer: If you’re in paid work and between 18 and 65, your employer will usually put in at least 3%.
The government: Contribute enough each year and the government chips in, too! The government contribution is $521.43 a year. To get it all, you must put at least $1042.86 into your KiwiSaver account each year. If you put in less, you’ll only get part of it.
Returns: Your investments make money for you too. Your KiwiSaver provider calculates your balance and you can watch it grow.
When can I get my money?
KiwiSaver is a long term investment that gets bigger the longer you have it. Normally you can’t touch it until you retire at 65.
You may withdraw some of it earlier to buy your first house, because retirement is likely to be cheaper if you own your home. You can also use it as an investment vehicle during your retirement.
If you’re really struggling, you can take out some or all of your money earlier, including if you have a serious illness, or are under significant financial hardship.
Who is Booster?
Booster is Kiwi-owned and operated. We’ve been looking after New Zealandersʼ money for over 20 years.
Booster KiwiSaver Scheme members can get personalised advice for their KiwiSaver and retirement goals and may be eligible for free accidental death cover.
That means that should the worst happen, your estate can get up to $50,000 (Tʼs & Cʼs apply).
We offer free online budgeting and planning tools, an extensive network of financial advisers and a real-time, Wellington based customer services team to help you make sense of your money.
Booster Investment Management Limited is the manager and issuer of the Booster KiwiSaver Scheme (Scheme). The Scheme’s Product Disclosure Statements are available at www.booster.co.nz
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