What is KiwiSaver and How Does it Work?

What is KiwiSaver, how does it work and how does it benefit everyday Kiwis? Canstar explains…

Having been around for more than a decade, the retirement savings initiative KiwiSaver is something most Kiwis will have heard of. According to the Financial Markets Authority’s latest KiwiSaver report, there are 2,934,268 KiwiSaver members. As NZ’s population currently sits at 4.8 million, it reveals most of us are enrolled in the investment scheme (61%). But what is KiwiSaver, how does it work and how does it benefit everyday Kiwis?

What is KiwiSaver and How Does it Work? In this guide we cover:

How does KiwiSaver work?

Typically, KiwiSaver works by an investor, let’s say you, choosing a KiwiSaver scheme to join. If you don’t make an active choice of scheme, you’ll get automatically enrolled into your employer’s chosen scheme. Or a default scheme chosen by Inland Revenue. 

Default scheme providers are selected by the government based on factors including: investment experience, fees, member education and organisation capabilities. New KiwiSaver members are usually evenly allocated between default scheme providers. You can find all the default KiwiSaver scheme providers in New Zealand on the IRD website.

If you are allocated to a default provider’s KiwiSaver scheme, your KiwiSaver contributions will be invested in the scheme’s conservative investment fund option. You can find out who your KiwiSaver scheme provider is by signing up to myIR Secure Online Services, or calling the IRD.

But know that from July 1, 2021, KiwiSaver members with savings sitting in a default fund will find their retirement nest eggs (or savings towards a first home) reinvested in a balanced, rather than a conservative, fund. As of 2020, around 400,000 KiwiSaver investors were in this situation.

If you work for an employer, you can choose to contribute a percentage of your salary (either 3%, 4%, 6%, 8% or 10%). Your employer will also contribute at least 3% of your gross salary, which is invested in your KiwiSaver account. If you are employed and enrolled in KiwiSaver, then you have to contribute a minimum of 3%. 

The self-employed are able to make contributions by making payments, of an agreed rate, directly to their KiwiSaver providers. 


What is a KiwiSaver scheme and a KiwiSaver provider?

A KiwiSaver scheme is an investment fund managed by a scheme provider. Here are the current KiwiSaver scheme providers as listed on IRD’s website: 

  • Amanah NZ KiwiSaver Ltd
  • AMP Services (NZ) Limited 
  • ANZ Investments NZ
  • Aon KiwiSaver Scheme 
  • ASB Group Investments Limited
  • BNZ Investment Services Limited
  • Booster Investment Management 
  • BT Funds Management
  • Civic Financial Services
  • Craigs Investment Partners Superannuation Management Limited
  • Fisher Funds Management Ltd
  • Implemented Investment Solutions Limited
  • Generate
  • Kiwi Wealth
  • Koura Wealth Limited
  • Lifestages

  • Medical Assurance Society NZ Limited
  • Mercer
  • Milford Funds Limited
  • New Zealand Anglican Church Pension Fund
  • New Zealand Funds Management Limited
  • Nikko Asset Management New Zealand Limited
  • Pathfinder Asset Management
  • Pie Funds Management Limited
  • QuayStreetAsset Management New Zealand Limited
  • SBS Bank
  • Simplicity
  • Summer
  • Superlife Limited
  • Westpac

In New Zealand, KiwiSaver schemes are regulated by the Financial Markets Authority (FMA) to ensure they are competitive and in members’ best interests.

Not all schemes are created equal, though. You need to take into consideration factors such as: performance, risk levels, management fees and special features, like ethical and social investment offers. 

As mentioned above, if you haven’t made an active decision about which scheme you want to join, you’ll either be automatically enrolled into your employer’s chosen scheme or into a default scheme

Compare KiwiSaver schemes with Canstar

What are the different KiwiSaver fund types?


Most KiwiSaver providers offer a variety of investment funds. These give you the option to choose your own investment strategy. Fees and returns vary, depending on your chosen scheme. But here is an overview of the six most common fund types and what they invest in:

  • Cash fund

A low-risk fund that typically invests in bank deposits and other fixed-interest investments.

  • Conservative fund

A low- to medium-risk fund that invests in a high proportion of bank deposits and fixed-interest investments, and a lower proportion of growth assets, such as shares and property. 

  • Balanced fund

A medium risk fund that generally invests in a more equal split between higher risk growth assets, such as shares and property, and more stable investments, including fixed interest and bank deposits.

  • Growth fund

A medium- to high-risk fund that invests in a high proportion of shares and property, with a lower level of bank deposits and fixed interest.

  • Aggressive fund

This is a high-risk fund type that invests mainly in shares. 

  • Life Stages fund

A fund type that varies as you age. This type of fund is managed by your fund manager and automatically changes your investment options as you hit certain “milestone ages”. They generally start with riskier high-growth investments and move towards conservative as you reach retirement age.

You can learn more about the different types of KiwiSaver funds here

How does the KiwiSaver government contribution work?

To help you save, the NZ government makes annual contributions towards your KiwiSaver account, as long as you meet certain criteria

The government pays 50c for every dollar that you contribute, up to a maximum of $521.43. This means that you must contribute $1042.86 annually to qualify for the maximum annual government contribution.

However, if you contribute less than $1042.86 from your salary, you can make voluntary contributions to ensure you receive the full payment from the government.

The government contribution is only valid up until the age of 65, when you become eligible to withdraw your savings. 

How can you use KiwiSaver for a first home withdrawal?

KiwiSaver first home withdrawals

While KiwiSaver was designed primarily to provide for retirement, you can use your funds to help purchase a first home.

As long as you have been contributing for at least three years, you may be able to withdraw from your KiwiSaver account early to help with your first home purchase.

According to the KiwiSaver website, you are able to withdraw all your funds, provided you leave a minimum balance of $1000 in your account. 

If you want to withdraw from your KiwiSaver to purchase a first home, contact your provider. But make sure you do this at the start of your home-buying journey.

In some circumstances, even if you’ve owned a home before, you may still be able to withdraw your savings to purchase a new home. In this case, your KiwiSaver scheme provider will need to determine if you’re in the same financial position as a first home buyer. 

One example of this is in the case of a divorce, if you’re back to starting from scratch, with regard to property ownership. You need to apply via Housing New Zealand’s Kāinga Ora, to assess your eligibility for KiwiSaver withdrawal as a previous home owner.

In order to apply for this withdrawal, you need a “letter of determination” from Housing New Zealand, which proves your financial eligibility.


Choosing the right KiwiSaver scheme provider and fund type

Ultimately, the more informed you are as a KiwiSaver investor, the better the decisions you’ll be able to make, which should help you build more funds towards retirement or that all-important first-home deposit.

And this is where Canstar can help. Our KiwiSaver dynamic comparison tables put all the information you need at your fingertips, from average five-year returns to fees.

So if you want to discover if you’re getting true value from your KiwiSaver, start comparing providers today by hitting on the button below.

Compare KiwiSaver providers for free with Canstar!

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