Everything first home buyers need to know about KiwiSaver

Squirrel
27 September 2024
Stone brick wall with a piggy bank suspended on a metal rod protruding from the wall

Although most of us probably know it best as a retirement savings scheme, there are a whole raft of other benefits you get from being part of KiwiSaver.

And today, we’re here to talk to you about one in particular: tapping into your KiwiSaver funds to help buy your first home.

Over the course of this article, we’ll dive into exactly what KiwiSaver is, how to get the most out of it, and what you need to know about the process of making your KiwiSaver first home withdrawal happen.

Let’s get into it.

First up, how does KiwiSaver work exactly?

KiwiSaver is a voluntary savings initiative, established by the government in 2007 to help New Zealanders save for retirement.

To enrol, you must either be a New Zealand citizen or hold a visa which allows you to stay here indefinitely, and you must be living in New Zealand most of the time.

The process of opting in and making contributions varies slightly, depending on how old you are, and your working situation.

If you're working for someone else:

As long as you’re between the ages of 18 and 64, you’ll usually be enrolled automatically when you start a new job with a new employer—although you can choose to opt out again with 2-8 weeks of your start date. 

It’s possible to join KiwiSaver before the age of 18, but you’ll need permission from your parent or legal guardian first—and will need to join by applying directly to a KiwiSaver provider, rather than through your employer (be sure to let your employer know you’ve done this). 

Once you’re opted in, your KiwiSaver contribution will then be automatically deducted from your pre-tax income every time you get paid. You can set your contribution level at 3%, 4%, 6%, 8% or 10% of your before-tax income, depending on how aggressive you want to be with your savings. 

Your employer is required to contribute at least 3% of your gross income, on top of your salary, to your KiwiSaver account as well.

And finally, as long as you’ve contributed $1,042.86 of your own money to KiwiSaver in any given year (1st July to 30th June), you’ll also be eligible for a government contribution of up to $521.43. Even if you don’t contribute the full amount, the government will still contribute 50 cents for every dollar of your own money saved up to that threshold.

If you're self-employed:

First up, you’ll need to enrol directly with the KiwiSaver provider of your choice. Make sure you’re doing plenty of research into your options beforehand, to help you choose the provider and fund that’s right for you (more on that shortly).

When you sign up, you’ll agree on the terms and conditions of your contributions with your provider—i.e. how often you’re going to contribute, and how much. Again, you have the choice of setting your contribution at 3%, 4%, 6%, 8% or 10% of your before-tax income. 

Once that’s all sorted, if your income is subject to PAYE, your contributions will be automatically deducted every time you get paid. If not, you’ll need to make voluntary contributions to your KiwiSaver account.

Unfortunately, you won’t benefit from employer contributions—but as long as you're contributing your own money you will be eligible for some, or all, of the government contribution (up to $521.43 if you contribute at least $1042.86). 

Other need to knows

There are plenty of free calculators available online, like this one from Sorted, to help you work out how much you’ll have saved at retirement, depending on your contribution level.

You also have the ability to make extra voluntary contributions to your KiwiSaver account whenever you like, or can take a “holiday” from making payments for an agreed period should your circumstances change.

Benefits of KiwiSaver

Here are some of our favourite benefits KiwiSaver has to offer:

  • Contributions are deducted from your pay automatically, which means you don’t have to think about it—making saving a whole lot easier.
  • It’s a low-cost option for investing in managed funds. (And generally, your KiwiSaver provider takes care of this for you).
  • Whenever you change jobs, your KiwiSaver account moves with you.
  • It keeps your savings at arm’s length. If you’re saving for retirement, you generally won’t be able to touch your KiwiSaver funds until the age of 65, when you get New Zealand Superannuation.
  • It’s designed to help you, so if you experience financial hardship, you may be eligible to withdraw some, or all, of your funds early.
  • As long as you’re contributing regularly to your KiwiSaver, your employer and the government are required to also make contributions on your behalf.
  • You can use your KiwiSaver funds to help make up the deposit for your first home.
  • In some cases you may also be eligible for a “second chance” home withdrawal. This is where you’ve previously owned a home or land, but find yourself in a similar position to a first-home buyer (for example, as the result of a relationship break up).

Pink piggy bank

Top tips for making the most of your KiwiSaver

As far as investments go, the way KiwiSaver works makes it incredibly easy to be hands-off. But like with any investment, you want to make sure you’re tailoring your KiwiSaver settings to best suit your financial goals. Here are our top tips to consider.

Tip 1: Choose the right fund for your financial goals

There are five different types of KiwiSaver funds on offer, each of which sits at a different point along the risk-return spectrum.

1. Aggressive – much higher risk for potentially much higher returns, prone to big swings in value. Between 90%-100% of your KiwiSaver balance will be invested into growth assets like property and shares.

2. Growth – higher risk for potentially higher returns, but less so than Aggressive funds. Between 63%-90% of your KiwiSaver balance will be invested into growth assets, with the remainder invested into (more stable) income assets like cash, bonds and fixed interest.

3. Balanced – decent potential returns, but with a higher proportion of funds invested into income assets providing less overall volatility. Between 30%-63% of your KiwiSaver balance will be invested into growth assets, with the remainder in income assets.

Note: Unless you selected a KiwiSaver fund when you enrolled, you will have been automatically placed in a “default” fund. Since December 2021, all default funds (which are selected by the government) are now Balanced funds.

4. Conservative – less risky, but unlikely to deliver great returns. Roughly two thirds of your KiwiSaver balance will be invested in income assets, with the remainder in growth assets.

5. Defensive – the safest type of KiwiSaver fund, but typically with the lowest returns. The majority of your money (upwards of 90%) is invested in income assets, with the remainder in growth assets.

In short, funds at the higher-risk end of the spectrum tend to deliver bigger returns (good for growing your money) but can be pretty volatile (not so good if you want to protect your investment).

Those at the lower-risk end tend to be more stable (good if you’ve got that money earmarked for something in the near to mid-term) but deliver lower returns (not so good if you want to grow your money).

Tip 2: Raise your KiwiSaver contribution rate (if you can)

It can be tempting to stick with the minimum 3% contribution rate, rather than sacrificing more of your take-home pay—but before you decide how you want to contribute, spare a thought for your future self.

Increasing your KiwiSaver contributions is a surefire way to boost your savings and can make a massive difference in the long run. If you’re not sure what contribution rate you’re on, just ask your employer.

Tips 3: Make additional contributions

When you’re setting a budget, if you’re in a position to save a bit of extra cash towards your retirement or house deposit, consider sending that money directly to your KiwiSaver account.

Not only is it a good way to stop you from dipping into those savings whenever you want—but the longer that money is in KiwiSaver, the more time it has to grow.

You can only withdraw KiwiSaver funds in very limited circumstances—when you reach retirement age, are buying your first house, or (in some cases) if you experience financial hardship—so we wouldn’t recommend sending all your savings that way.

For any savings you want to be able to tap into, you might be better off looking at a high-interest savings account or term deposit instead. Squirrel also has a range of investment options available which offer great returns, and the freedom to access to your savings should you need to. 

Tip 4: Don’t miss out on the government contribution

Even if you’re not in the workforce, contributing just $20 a week to your KiwiSaver account means you’ll be entitled to the full government contribution—a free $521—at the end of the year.

Tip 5: Check your tax

Prescribed investor tax rates (PIRs) can be confusing. But they’re also worth having a look at to ensure that you’re not paying too much tax. You can work out your PIR via the Inland Revenue website—it only takes a few seconds and can save you from paying unnecessary fees.

Tip 6: Review your KiwiSaver provider, and fund, whenever you reach a big financial milestone

You can enlist the help of a KiwiSaver adviser, or do it yourself—but either way, it’s a good idea to review your KiwiSaver settings every few years, as your financial goals and personal circumstances change, to make sure that the one you’re in is still right for you:

  • If you’re looking to grow your money quickly (i.e. to save for a house deposit, or kickstart your retirement savings) then an Aggressive or Growth fund may be the right option.
  • As you near retirement, or if you’re wanting to use your KiwiSaver for a house deposit in the near-term, it’s likely worth moving to a Defensive or Conservative fund. This will help to protect you against any market volatility that could unexpectedly slash the value of your KiwiSaver balance.
  • And even after you’ve tapped into your KiwiSaver to help with your first home deposit, to ensure it’s set up to support you reaching your next financial goal.

Remember, you’re in charge here, so although your provider can advise you on the right scheme for you, it’s worth doing your own research too. 

Coins in the air, hands catching them

How can KiwiSaver help you buy your first home?

Getting a deposit together for your first home can be a daunting task.

That’s why, as well as helping you save for retirement, KiwiSaver is also designed to give first home buyers a leg-up into the housing market, via the KiwiSaver first-home withdrawal. The sooner you start the better.

If you’re purchasing your first home, you could be eligible to withdraw some (or most) of your KiwiSaver balance to put towards your house deposit.

You’ll need to leave at least $1,000 in your account—but otherwise, you can access any contributions you’ve made, as well as those from your employer, the government, and any returns generated on your investment as well.

There are certain criteria you’ll need to meet in order to be eligible:

  • You must have been a KiwiSaver member for at least three years, contributing the required minimum amount (3%).
  • It needs to be your first time owning a property or a piece of land (not including ownership of Māori land)
  • You intend on living in the home i.e. it’s not an investment property
  • The property must be in New Zealand
  • And it must be the first time you’ve withdrawn from your KiwiSaver to purchase a property.

In some cases, even if you’ve previously owned a property or land, you may still be eligible to withdraw KiwiSaver funds to help with your house deposit—but you’ll need to get approval through Kāinga Ora, and then get from your KiwiSaver provider. You can read more about second-chance withdrawals on the Kāinga Ora website.

Note: up until May 2024, eligible KiwiSaver members could also access the First Home Grant scheme—a cash contribution ranging from $5,000 to $10,000 per eligible borrower, to go towards your deposit on your first home. As of 22 May 2024, applications for the First Home Grant are now closed.

Common KiwiSaver questions for first home buyers

Woman in blue shirt shrugging

What kind of ‘home’ can I buy with KiwiSaver?

While you are able to purchase land with your KiwiSaver savings, it is worth noting that the grant/withdrawal can only go towards the purchase of the land itself and not building materials for the actual construction of the house.

You can also use your savings to purchase off-the-plan apartments and existing homes. Your purchase must also meet KiwiSaver’s property criteria.

How do I get my KiwiSaver funds out when I want to buy?

Firstly, you’ll need to request a letter from your provider to confirm your eligibility to withdraw your KiwiSaver to go towards your house deposit.

When the time comes to purchase, you’ll then need to request a withdrawal form from your provider. Your lawyer will explain this to you, and you’ll need to sign the form in front of them.

It generally takes up to 10 working days for the funds to be released, depending on the provider, so it’s important to get on top of it well before settlement.

Can I access my KiwiSaver in advance if I want to buy at auction?

If you’re looking to buy at auction, the recommended approach is to try and negotiate a “variation” with the vendor, which will allow you to pay your deposit once your KiwiSaver funds have cleared (rather than up-front).

There are some instances where you may be able to access your KiwiSaver funds early, if you’re looking to buy at auction—although this is determined on a case-by-case basis. In order to get this across the line, you’ll need to make sure you’re talking to your lawyer and KiwiSaver provider well in advance of auction day, so you’ve got all your ducks in a row.

Can my parents cover my deposit at auction, and then I just pay them back when my KiwiSaver withdrawal comes through?

You need to be careful in this space. If this is something you’re looking to do, the recommendation is to chat to your lawyer for guidance before forging ahead—and you’ll need advance approval from both your KiwiSaver provider and the real estate agent.

Again, it’s often better simply to negotiate a variation with the vendor, which will allow you to hold off paying your deposit until your KiwiSaver funds come through.

How does my KiwiSaver withdrawal get paid to me?

Your KiwiSaver manager will pay your savings to your solicitor, rather than direct to you. Your solicitor will then keep this in a trust account until your deposit is required.

What happens to the KiwiSaver withdrawal if the purchase falls through?

If the purchase falls through, or settlement is not completed, your solicitor will send your KiwiSaver savings back to your KiwiSaver manager’s account. If this happens, you may be able to apply for a withdrawal again at a later date.

Can I combine my withdrawal or grant with another person?

Yes, you can combine your KiwiSaver savings with one or more members if you are looking to purchase a single dwelling together.

Let’s talk!

When it comes to KiwiSaver withdrawals, all of the criteria and conditions can get pretty confusing, pretty fast.

Ultimately, KiwiSaver was created to help you and it’s something you should take advantage of if you can.

We can help you work out what you’re eligible for and how much you can borrow. Our team is here to answer all of your questions and give you expert advice. We’ve even got a free First Home Buyers Guide  which has everything you need to know to get started.

If you’re looking for answers, get in touch today.


The opinions expressed in this article should not be taken as financial advice, or a recommendation of any financial product. Squirrel shall not be liable or responsible for any information, omissions, or errors present. Any commentary provided are the personal views of the author and are not necessarily representative of the views and opinions of Squirrel. We recommend seeking professional investment and/or mortgage advice before taking any action.

To view our disclosure statements and other legal information, please visit our Legal Agreements page here.


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