Already saving

If you are already saving for retirement, congratulations - you are already ahead of the game. But it's still worth considering KiwiSaver as well as or instead of your existing savings due to the generous incentives KiwiSaver offers.

Existing savings, KiwiSaver or both?

If you are already saving for retirement, you need to weigh up the benefits of your existing savings plan against KiwiSaver. You have three options:

• Join KiwiSaver and stop contributing to your current savings plan.
  This option is likely to suit you if you can't afford to save with two different savings plans and your current plan does not offer incentives that are as generous as the KiwiSaver incentives. If this is your situation, depending on your current savings plan you may be able to leave your existing savings in that plan and simply stop contributing. Alternatively you can consider transferring your existing savings into KiwiSaver so all your savings are kept together - just remember to check for any differences in benefits, including when you are able to withdraw your savings. Many retirement schemes allow you to access your money prior to age 65 but with KiwiSaver you can generally only withdraw your KiwiSaver savings at the later of when you become eligible for New Zealand superannuation - currently age 65, or after five years of membership.
• Join KiwiSaver and continue with your existing savings plan.
  This option is likely to suit you if you can afford to save with two different savings plans and your current savings plan has benefits such as easier access to withdrawal of your savings or more generous employer contributions. You would need to be able to afford to contribute at least 2% of your pre-tax salary or wages to KiwiSaver for the first year.
  The Government announced in the 2011 Budget that the minimum employee contribution rate and the default contribution rate will increase from 2% to 3% of gross salary or wages with effect from 1 April 2013.
• Continue with your existing savings plan and do not join KiwiSaver.
  This option is likely to suit you if you can't afford to save with two different savings plans, already receive incentives such as employer contributions from your current plan or you wish to retire before age 65 and your current plan allows you to withdraw your savings earlier than 65 (you are generally only able to withdraw your KiwiSaver retirement savings at the later of when you become eligible for New Zealand Superannuation or after five years of membership).

I'm nearing 65, is it worth it for me?

The general answer for this is if you can afford it, join before you turn 65 so you can get the maximum benefits. The rules for withdrawing KiwiSaver retirement savings are that you can withdraw your savings at the later of:

• When you become eligible for New Zealand Superannuation, currently age 65.
• After five years of saving with KiwiSaver. This means that if you join after age 60 you will need to stay a member of KiwiSaver for five years before you can apply to withdraw your retirement savings. Membership of a complying superannuation fund may count towards the five years.

Over those five years, if you have been contributing at least $1,042.86 per year (1 July to 30 June) and are eligible for the full year, the Government will contribute $521.43 each year. The Government will also put in $1,000 when you first join, and if you are employed you are likely to also receive employer contributions.

Take the scenario of someone who is not working and contributes $1,042.86 each year - at the end of five years he or she will have received around $3,605 from the Government towards their savings and will have only put in around $5,210 themselves. Plus there could be investment returns in addition to the contributions.