KiwiSaver: Top up savings with two schemes

Some employer-funded schemes predate KiwiSaver but there are good reasons for joining that too. Photo / Getty Images

People already in an employer-supported superannuation plan can also benefit from joining KiwiSaver.

I am a member of a government superannuation scheme that predates KiwiSaver.

I'm quite happy with it but can I also enrol with KiwiSaver?

I wouldn't get employer contributions twice, but would I get tax credits and would it be worth doing if I can afford to contribute to two schemes?

KiwiSaver certainly isn't the first word in workplace retirement savings.

Many people, like you, will have a longstanding super scheme that their employer makes contributions to, particularly in the public sector.

Some of these schemes closed the door to new members when KiwiSaver launched but continue to take staff and employer contributions for existing members.

I asked Michael Raynes, head of marketing and communications at Fisher Funds, whether it's possible to already be in a workplace superannuation scheme and join KiwiSaver.

"I'm pleased to confirm the answer to all of your questions is Yes.

"You are able to join KiwiSaver in addition to your government super scheme but there are some things you need to be aware of.

"Firstly, you will be required to contribute an amount equal to 3 per cent, 4 per cent or 8 per cent of your gross income.

"As with all KiwiSaver members you can change your contribution rate by letting your employer know.

"Secondly, you are eligible to receive the $1000 kick-start and the government member tax credits.

"If your contributions total more than $1042.86 per year then you will maximise these and receive the matching government contribution of $521.43.

"In case your contribution doesn't add up to $20 a week ($1042.86 a year), you have the ability to top up your account each KiwiSaver year to ensure you maximise this benefit.

"If you wanted to simply put enough in KiwiSaver to get your maximum member tax credit entitlement, after 12 months you have the option of taking a contributions holiday. At this point your 3 per cent, 4 per cent or 8 per cent contribution would stop and you are no longer required to contribute from your pay but you can still arrange to contribute $1042.86 a year directly to your KiwiSaver scheme provider.

"Thirdly, as you point out you will not be eligible for any employer contributions assuming that your employer's contribution to your existing super scheme is equal to or more than 3 per cent of your pay.

"So in summary if you can afford to contribute to KiwiSaver in addition to your government super scheme then you it makes sense as you will benefit from the $1000 kick-start and the government member tax credits that you are currently not receiving," Raynes says.

Another benefit of KiwiSaver is that if you don't already own your own home you can access some of your KiwiSaver funds to put towards a deposit once you've been in the scheme for more than five years.

Currently you are able to withdraw any contributions made, plus the investment earnings.

Based on National's pre-election promises it's likely this will be changed to make more of the KiwiSaver funds available to first home buyers.

It has said that from April next year you will also be able to take out the annual tax credits you've received from the government.

Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.