KiwiSaver for self-employed individuals
KiwiSaver for self-employed individuals: What you should know
As a self-employed individual, managing your finances can be both rewarding and challenging. One crucial aspect of financial planning that often gets overlooked is retirement savings. KiwiSaver, New Zealand's voluntary savings scheme, is not just for employees; it can also be a valuable tool for self-employed individuals. Here’s what you need to know about KiwiSaver and how it can benefit you.
How to join KiwiSaver as a self-employed individual
To be eligible to join KiwiSaver, you must live, or normally live, in New Zealand and be a New Zealand citizen or entitled to stay in New Zealand indefinitely.
- Choose a provider: Research and select a KiwiSaver provider that aligns with your investment goals and risk tolerance. Each provider offers different funds, fees, and other features.
- Complete the application: You’ll need to choose a scheme provider and apply direct to them. The scheme provider will notify Inland Revenue that you’ve joined KiwiSaver.
- Set your contribution rate: As a self-employed individual, you have the flexibility to choose how much you want to contribute. The minimum contribution is 3%, but you can opt for higher rates (up to 10% or more) based on your financial situation.
Making contributions
Unlike employees, self-employed individuals do not have automatic deductions from their pay. Instead, you will need to make contributions yourself. Here are some options for contributing to your KiwiSaver account:
- Regular contributions: Set up a regular payment schedule (weekly, monthly, or quarterly) to contribute a fixed amount to your KiwiSaver account.
- Lump-sum contributions: If you have a particularly profitable month or quarter, consider making a lump-sum contribution to boost your savings.
Benefits of KiwiSaver for self-employed individuals
- Retirement savings: KiwiSaver helps you build a nest egg for retirement, ensuring you have funds available when you need them.
- Government contributions: By contributing to your KiwiSaver account, you can take advantage of the government’s annual contribution, which can significantly enhance your savings. Contributions to your KiwiSaver account are made from your after-tax income, but you may be eligible for the government contribution of up to $521.43 per year, provided you contribute at least $1,042.86 annually.
- Flexibility: You have the freedom to choose your contribution rate and adjust it as your income fluctuates. This flexibility is particularly beneficial for self-employed individuals whose earnings may vary.
- Investment Options in the Mercer KiwiSaver scheme: KiwiSaver providers offer a range of investment options, allowing you to choose a fund that matches your risk tolerance and investment goals.
Considerations for self-employed individuals
While KiwiSaver offers many benefits, there are a few considerations to keep in mind:
- No employer contributions: Unlike employees, self-employed individuals do not receive employer contributions, which means you need to be proactive in your savings strategy.
- Managing cash flow: Ensure that your contributions fit within your overall cash flow management. It’s essential to balance your business expenses with your retirement savings.
- Review your plan regularly: As your business grows and your financial situation changes, regularly review your KiwiSaver plan to ensure it continues to meet your needs.
If you would like to discuss your investment options in the Mercer KiwiSaver scheme, please speak with one of our Financial Advice team members. You can fill out this online form for a no obligation call back from Mercer’s financial advice team https://purl.co.nz/requestFinancialAdvice/.
Mercer also publishes monthly investment performance and market updates, available on our website. To read our latest monthly report please click here.
Additional resources
- Fund Selector – to work out your risk appetite.
- Financial Advice Provider – Disclosure Statement
- Estimate your retirement savings and income– Use our Retirement Income Simulator to see what your retirement could be worth.
This article has been prepared by Mercer (N.Z) Limited. The information contained in this article is intended for general guidance only. It does not take into account your particular financial situation or goals. Before making any investment decision, you should refer to the Product Disclosure Statement or consult an appropriately qualified financial adviser. The Mercer KiwiSaver scheme is issued by Mercer (N.Z.) Limited. For information about this product, please refer to the Product Disclosure Statement which is available free of charge on /www.mercerfinancialservices.co.nz/
