Is Putting Extra Money Into KiwiSaver Worth It?

KiwiSaver is a great addition to your investment or savings toolbelt. And while chucking in a little of your paycheck every fortnight is great, should you be putting extra money into Kiwisaver?

A few dollars every payday is a small sacrifice to make but, come time to retire, your extra KiwiSaver contributions could go a long way. And that’s important. Because our longer life expectancies mean longer retirements. And longer retirements mean we’ll need more money to enjoy our golden years.

In fact, when NZ last raised the retirement age 20 years ago, the average life expectancy was around 78.5. And while the retirement age hasn’t increased since, our life expectancy has, up around four years, to around 82.5 years old.

So, to ensure you have enough tucked away come retirement, is it worth putting extra money into KiwiSaver? Canstar takes a look.

KiwiSaver retirement fund

What should I set my KiwiSaver contribution to?

If you have KiwiSaver, you are required to contribute 3% of your pay. But, you can set your contribution rate higher. So when thinking about making extra contributions, this should be the first place you start.

When setting your KiwiSaver contributor rate you have five choices: 3%, 4%, 6%, 8%, and 10%. What you decide could impact your KiwiSaver to the tune of many thousands of dollars, so it’s important to consider your contribution rate carefully. Which rate you choose should be based on a few factors:

How tight is your budget?

If you live paycheck to paycheck and don’t have a lot of room to spare, then, obviously, a lower contribution rate will be a more affordable option. Also, because KiwiSaver locks away your contributions, it’s not the best place to invest extra cash that you might need back in a hurry. While it’s important to save as much as possible for retirement, it’s not a good idea to burden yourself with debt or create financial insecurity in the process. 

Does your employer match your contributions?

Your employer is required to pay 3% into your KiwiSaver every pay. This is one of the biggest benefits of KiwiSaver, it’s an investment that your employer contributes to as well. But, your employer can actually contribute more, and many do.

Many employers actually match your investor rate (up to 10%). So the more you contribute, the more you’ll get from your employer. 

What will you do with your money?

If you only contribute 3% of your pay to KiwiSaver and blow the rest of your money, perhaps you should rethink your saving strategy. If you can’t trust yourself to save, especially if you’re saving for a first home, then upping your KiwiSaver contributions is a way of forcing your hand and locking in your savings for the long-term.

How can I change my contribution rate?

Changing your contributor rate is super easy.

Let your employer know you want to change it, and they can do it for you. All you’ll need to do is fill out the KiwiSaver deduction form, which takes just a few minutes.

Is putting extra money into KiwiSaver worth it?

If you have a lot of money sitting in a savings account, or you’re expecting a large windfall such as a bonus or inheritance, it could be worth putting some of it into your KiwiSaver.

However, before making the decision consider:

Will you need the money?

Apart from a few exceptions, you can’t access your KiwiSaver until retirement. If you are of retirement age already (or close to it), KiwiSaver may be a great place to store your money. Even a conservative fund will often see better returns than a savings account or term deposits, but with less of the risk young investors can afford to swallow.

If you are still years away from retirement, you may need to think about having access to your cash.

With the exception of a first-home deposit, you likely won’t see any of your KiwiSaver money until retirement. So you need to be confident that you can go without any money you put in. As Covid-19 has shown many of us, financial stability can quickly change. Just because you have excess funds now, doesn’t mean you always will.

While putting in some extra money can be a good idea, it’s important not to overcommit.

→ Related article: How to Access Your KiwiSaver Early

What are your saving goals?

As mentioned above, KiwiSaver is usually for two things: retirement or a first home deposit. If you’re saving for retirement, KiwiSaver offers solid gains over the long term.

And if you’re saving for a first-home, KiwiSaver is also a good option. You can have as much or as little risk as you feel comfortable with, but still see some growth on your investment.

If you are simply looking to get more from your savings, whether or not you should put more into your KiwiSaver probably depends on your current saving strategy. Remember KiwiSaver funds are not readily accessible, so if liquidity is important for you, it could be a wiser choice to invest elsewhere, for example shares or managed funds.

However, buying shares and investing in managed funds, even KiwiSaver, comes with fees and costs. But with KiwiSaver, these are overseen by the Financial Markets Authority, which puts pressure on providers to keep fees/costs as low as possible. So as investments go, you can be assured that KiwiSaver schemes are some of the best value around.

Small savings can have big results

Can a few extra dollars per month make a big difference? We crunched the numbers on a 35-year-old on an average income of $68,000, with a typical $20,000 in a balanced KiwiSaver fund, and making contributions of 3%. On these numbers they could expect to retire with about $201,000 saved.

However, saving an extra $100 per month could boost their KiwiSaver to $255,000 by age 65. Or, if they really hit the accelerator, and instead of saving the extra $100 each month doubled their salary contribution to 6%, they could pocket over $92,000 more by the time they hit 65: $293,000.

And these are just the results from a balanced fund…

What fund do you have?

…because the type of fund you choose also makes a significant difference. This year, the default KiwiSaver fund profile switched from conservative to balanced for just this very reason.

For the more risk associated with your investments, typically, the greater your possible returns. Most KiwiSaver funds cover these fund types:

  • Defensive
  • Conservative
  • Balanced

  • Growth
  • Aggressive

So, continuing with our example above, if our 35-year-old paying 6% contributions into the balanced fund had swapped to a growth fund, they could expect $344,000 by retirement. Or, in an aggressive fund, $407,000.

While these are just average examples, based on previous years’ returns and shouldn’t be taken as gospel, they do give an indication of how a few extra savings, plus consideration into the type of KiwiSaver scheme you join, can have a big impact on your retirement lifestyle.

→ Related article: KiwiSaver: Which Fund Type Is Right For Me?

Make the most of the benefits

But however much you choose to add to your KiwiSaver, even if you’re not working, it’s a good idea to make the minimum contribution of $1042.86 to ensure you get the government contribution of up to $521.43. Otherwise, you’re giving up the chance of some free government money!

Compare KiwiSaver Providers with Canstar

If you’re comparing superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for a KiwiSaver member with a balance of $50,000 in a Growth fund, sorted by Star Rating (highest to lowest), followed by company name (alphabetical) some may have links to providers’ websites. Use Canstar’s KiwiSaver comparison selector to view a wider range of super funds. Canstar may earn a fee for referrals.

To read more about our latest KiwiSaver Awards or to compare KiwiSaver providers, click on the button below.

Compare KiwiSaver providers for free with Canstar!


author andrew broadley

About the author of this page

This report was written by Canstar Content Producer, Andrew Broadley. Andrew is an experienced writer with a wide range of industry experience. Starting out, he cut his teeth working as a writer for print and online magazines, and he has worked in both journalism and editorial roles. His content has covered lifestyle and culture, marketing and, more recently, finance for Canstar.


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