One of the great benefits of KiwiSaver is that it’s not just your contributions that help grow your investment – your employer adds money to your KiwiSaver investment too!
And thanks to the power of compounding returns (more detail on this magic below), even small employer contributions invested in your KiwiSaver account will help boost your retirement savings over the long-term, which can make a big difference later in your life.
KiwiSaver employer contribution rate
If you are aged between 18 and 65 and contributing to KiwiSaver via your salary or wages, your employer is required to put in a minimum of 3% of your Before Tax Pay (less employer's superannuation contribution tax).
This 3% applies whether you are contributing 3%, 4%, 6%, 8% or 10% yourself.
This money is added to your KiwiSaver investment every time you get paid, whether that be weekly, fortnightly, monthly or other. You will be able to see this amount on your payslip and it will be also on your annual IRD tax statement, which you can download from My IR.
If you can’t see your employer’s KiwiSaver contribution on your paycheck, talk to your payroll officer or your manager to make sure it’s being added.
Employer contributions to KiwiSaver - an exception to the rule
The above does not apply if you are on a "Total Remuneration Package". This allows an employer to set a fixed remuneration amount for each employee. If the employee joins KiwiSaver, the cost of the employer contribution must then come out of the employee's pay.
Some employers may choose to contribute more to your KiwiSaver
Some employers may choose to contribute a higher percentage to your KiwiSaver account, but anything over 3% is optional.
Some employers may also continue to contribute to your KiwiSaver account when you are past the age of 65, when they are no longer required to do so. They also might choose to contribute before you turn 18. Again, this is entirely voluntary on their part.
TIP: If you are considering a new job and negotiating the terms of your employment agreement, it’s a good idea to ask about your new employer’s KiwiSaver contribution rate.
KiwiSaver when you don’t have an employer
There are many situations where you may not have an employer, for example if you are self-employed, a contractor, freelancer, stay-at-home parent or simply not in paid employment.
If you are not employed, then you won’t receive employer contributions.
However you can still contribute to your KiwiSaver by making regular or one-off payments, and you will still be entitled to the government contribution of $521.43, so long as you meet the eligibility criteria (see details here) and are a KiwiSaver member for the full year and contribute $1,042.86.
Why an extra 3% employer contribution really matters - the magic of compounding returns
An extra 3% employer contribution to your KiwiSaver account may not seem like much at first, but over time, it can make a significant difference thanks to the power of compounding returns. With compounding, the returns you earn are reinvested, generating even more returns over the years.
Over 30 years, that additional contribution could add tens of thousands of dollars to your KiwiSaver account balance, giving you a far greater nest egg for retirement. It’s a small increase today that pays off in a big way in the future.
In summary
The employer contribution is one of the key benefits of KiwiSaver and helps boost your retirement savings. If you are employed but not a member of KiwiSaver, you’re missing out on it!
To see the difference your employer contribution rate could make to your KiwiSaver account by the time you retire, request a no-obligation meeting with one of our expert Generate Advisers.