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.
Published 6 May 2019
Pie Funds Management Limited is the issuer of the JUNO KiwiSaver Scheme. You can read our Product Disclosure Statement here. This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. We recommend you speak with a financial adviser. All content is correct at time of publication date.