What percentage of your pay should you contribute towards KiwiSaver?

If you are employed and sign up to KiwiSaver, you have the choice of contributing a varying percentage of your pay towards KiwiSaver.

The minimum you can contribute is 3%, and the maximum you can contribute is 10%, with options in the middle including 4%, 6% and 8%. You can also make voluntary contributions, which self-employed people have to do to be eligible to receive the Government contribution from participating in the scheme.

This post is not written to say you should definitely shift your contributions to 8% or 10 %, rather just highlighting how making an increase, even a small one, can make a difference. To do so, we will take a look at the following examples.

James, 18 years old, using his KiwiSaver to save for a first-home deposit

The only difference depicted below is James contributed 3% in one scenario, and 10% in the other.

From simply increasing his contributions from 3% to 10%, James reached his target house deposit figure 4 years earlier (aged 24 rather than 28) and retired with over $600,000 more in the bank.

Steph, 30 years old, using her KiwiSaver for retirement.

The only difference again below is Steph contributed 3% in one scenario, and 10% in the other.

Again, an increase in contributions resulted in a massive increase in savings come retirement (just over $500,000). For full assumptions of above graphs, refer to the link.

So, You want to change your KiwiSaver contribution rate…

All you need to do is fill out the ‘KS2’ form which is linked in the button below. Once you’ve done that, just hand or send the form in to your HR department at work (or your boss), and they will take care of the rest.

You should only increase your contributions if you can afford to do so, and aren’t investing the money elsewhere in a place that returns higher than your KiwiSaver. We do think though, from experience, that you learn to live with what your net income is after your KiwiSaver contributions. Having it come out of your pay before you ever get to touch it is both a great way to save for a first-home and better your golden years. If you want to know if you’re KiwiSaver fund is both being maximised for returns and suitable for your personal situation, follow the link below to our online fact find. The fact find only takes 5 minutes to complete, and once you have finished we will provide you with a free no-obligation KiwiSaver recommendation.

Compound Wealth is a KiwiSaver, Retirement and Private Wealth Financial Advice Firm based in Mount Maunganui, Bay of Plenty.