Taking a KiwiSaver contribution (savings) break

Updated 20 March 2023

If you are currently contributing to a KiwiSaver scheme (and have been a member of a KiwiSaver scheme for more than 12 months), you can choose to temporarily stop making regular contributions from your wages or salary. This is known as a savings suspension. 

What do you need to know?

• A savings suspension can be taken between three months and one year
• There is no limit to the number of savings suspension periods you can apply for
• You do not need to provide a reason for the suspension
• If you've been a member of a KiwiSaver scheme for less than 12 months you may be able to apply for an early savings suspension if you have made a contribution and you're experiencing, or likely to experience financial hardship.

Important considerations

Before you decide to suspend your KiwiSaver contributions, consider what you might be missing out on:

• Compulsory contributions from your employer of 3% of your salary (and potentially more if your employer is making voluntary higher, matching contributions).
• The annual government contribution of up to $521.43 if you’re eligible.
• The potential investment return on your contributions. 

For example, if you’re earning $50,000 a year and on a KiwiSaver contribution break, you will be missing out on at least $3,521.43 a year paid into your KiwiSaver account (made up of the 3% you would be contributing from your salary, your employer’s 3% contribution, and the government’s maximum contribution of $521.43). 

How does this affect your retirement? 

Even though it might seem far away, it’s a good idea to think ahead to retirement and how much money you will need to fund the lifestyle you desire. 

If you decide to suspend your KiwiSaver contributions, while it may provide immediate financial relief, it's important to understand the long-term consequences for your retirement savings. 

The consequences of not contributing to your KiwiSaver account are best understood through how your balance grows or compound returns. Compound returns are the returns earned on both your initial savings (what you, your employer, and the government have contributed), and then the returns earned when those returns are reinvested. Compound returns are the reason you should start saving for retirement as soon as possible. 

You will also lose out on the benefits of compounding returns if you pause your KiwiSaver contributions. As you invest less money, the potential for that money to grow slows, putting your retirement savings goal further out of reach.  

Try the MAS KiwiSaver Retirement calculator to see if your KiwiSaver balance is on track to provide you with the retirement lifestyle you desire. Now take stock – are you on track to reach your retirement number? If not, it might be worth reconsidering that savings suspension. 

Find out more about the MAS KiwiSaver Scheme here.

Looking to buy your first home?

If you are looking to buy your first home and want to qualify for the First Home Grant, one of the conditions is that you must have been contributing to your KiwiSaver account for at least three years. If you suspend your contributions, you may not qualify for the grant as soon as you would like to. Other eligibility criteria apply. 

Here are some more common mistakes to avoid when using your KiwiSaver savings to buy your first home or learn more about buying your first home with your Kiwisaver savings.

Applying for a savings suspension

Before applying for a savings suspension, it could be worthwhile to speak to one of MAS’ Advisers about the potential impact of suspending your KiwiSaver contributions – it costs nothing. Call us on 0800 800 627 or email info@mas.co.nz.

You will need to apply for a savings suspension through ird.govt.nz