It’s great if you’re contributing regularly to KiwiSaver. It’s a good way to save for retirement, and you can also use the money to help buy your first home.
But sometimes, life gets in the way of your best intentions to save.
Saving is a habit you don’t want to break, but having debt or unexpected costs can change the amount of money you can afford to save.
Maybe you need to pay extra bills, support your family, or pay off a loan faster. If ‘life happens’, you may want to press pause on your automatic KiwiSaver contributions.
What can you do?
The IRD calls this pause a ‘savings suspension’, previously a ‘contributions holiday’.
If you’ve been a KiwiSaver member for 12 months or more, you can take a break from contributing. You won’t need to provide any reasons, either.
If you haven’t contributed to your KiwiSaver for at least 12 months, you can apply to the Inland Revenue Department for an early savings suspension, but you need to prove you’re struggling to pay your contributions.
There’s strict criteria, and you may need to show evidence. This application may not be accepted if you, for example, overindulged and spent too much!
Savings suspensions are for three months to a year. If you’ve applied for an early suspension, the IRD will work out an appropriate term with you.
Apply through your KiwiSaver portal, which is the part of the IRD website showing your KiwiSaver details. Or you can download a form from the IRD website and mail it to them instead. If you’re stuck, call your KiwiSaver provider for help.
If your application is accepted, the IRD will tell your employer to stop deducting KiwiSaver contributions from your pay.
Is stopping contributions a good idea?
Remember, pausing your payments might have a short-term benefit, but it also has disadvantages you might want to consider.
When you stop contributing, your employer stops too. You could miss out on any returns on your investment – the smaller your balance, the lower the dollar impact of returns. And, if stopping means you haven’t saved enough to get the full government contribution (an extra $521 a year if you’re contributing enough) you’ll miss out on most or all of that, too.
In short, think hard about whether you really need to go on a savings suspension.
Perhaps you could lower your contributions rate instead, or try making up the difference with voluntary contributions when you can.
Information correct as at July 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a reliable indicator of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.