Employees contribute a minimum of 3% of income to KiwiSaver. Can you stop contributing if your budget is tight, even if you still have a job?
Yes, you can. You can take a savings suspension, between 3 months and 1 year. At the end of the holiday, you can apply for another. But is that a good idea long-term, given that the whole purpose of KiwiSaver is to build up a retirement nest egg?
You can only apply for a savings suspension once you’ve been contributing to KiwiSaver for 12 months. While you’re not contributing your employer also won’t be contributing, so if you need to use this option, tailor the length of the holiday to your changed circumstances. If one partner is off work for a few months, then a 3 month suspension makes sense. Don’t stop for the full year just because it’s available.
The Government contribution is based on your own contributions. If you stop contributing, then no Government money for you. However, even while on a savings suspension, you can contribute outside of the payroll. $20 per week will still get you the full Government contribution.
If you’re self-employed, but on PAYE, then you’re paying both the employee and employer contributions. After 12 months you can take a 12 month saving suspension, then just pay $20 per week, so you’ll still get the Government contribution. But remember to renew your suspension each year.
Remember though, the longer your KiwiSaver takes a holiday while you’re working, the fewer holidays you’ll be having when you retire.
Mark Lynch is a Registered Financial Adviser. His Disclosure Statement is available free upon request. Any comments in this column are the opinion of the writer and should not be construed as financial advice.