When we talk about KiwiSaver, people often refer to employees having their contributions matched by their employers.

For some savers, that’s a key benefit of KiwiSaver.

But if you’re self-employed, it’s vital to know that there are ways that the retirement savings scheme can work to help you build your nest egg, too.

Here’s what you need to know.

Set your contribution rate

Once you’ve signed up with a KiwiSaver provider, and selected your funds, your first step will be to work out how much you want to contribute to the scheme.

If you do not have income that is subject to PAYE deductions, you will need to make voluntary payments to your KiwiSaver account.

You can do this either on an ongoing basis, or as one-off contributions. Your KiwiSaver provider will give you information on how to make this happen.

If your self-employed income is processed through a payroll system and has PAYE deductions, your KiwiSaver contributions will automatically be taken from your PAYE pay at a minimum rate of 3 percent, as it is for other employees.

You have the option to contribute more than 3%, if you wish to., however,  your business (acting as your employer) is still only required to make a contribution of 3% as it would for other staff.

Important: Employer contributions may be subject to Employer Superannuation Contribution Tax (ESCT). If you are structuring your income and KiwiSaver contributions this way, it’s important to speak to an accountant to understand the tax implications and ensure it’s set up correctly.

Note: KiwiSaver contributions are not deducted from non-PAYE self-employed income, such as drawings or profits. Relying solely on PAYE deductions could leave you short of your retirement savings goals. Be sure to review your total contributions and speak to your SHARE investment adviser to consider whether you need to contribute any extra savings to meet your long-term objectives.

Regular contributions can pay off

While one-off contributions can sometimes make sense, if you choose to make regular payments to your account, you get the benefit of dollar cost averaging, which helps to smooth out fluctuations in asset valuations.

Dollar cost average means that sometimes you’ll invest when unit prices are high, and you get fewer units, but sometimes you’ll be investing when unit prices are low, meaning your contribution will buy more.

This means you don’t risk always contributing during times when share prices are high, for example.

Set goals

When you’re working out how much you want to contribute, it could make sense to think about your retirement goals and work back from there.

How much will you have from other investments to help you towards your goal, including potentially the sale of your business one day? What gap might be left? That gap might be the amount you decide you’ll need to grow in KiwiSaver.

Online calculators such as Sorted’s will give you a guide as to what contributions you might need to make to get there.

Find the right fund type

An important part of getting the most from your KiwiSaver plan, is choosing a fund that is a fit for your circumstances.

You’ll need to find a fund that is appropriate for your risk profile.

There are tools to help you identify your risk profile online, and we can also help.

Except in exceptional circumstances of financial hardship.KiwiSaver investments are generally locked in until you reach 65 or want to buy a first home,

Aim for the member tax credit

The Government offers a member tax credit to all qualifying KiwiSaver members who are over 18.

You will receive this at a rate of 50c per $1 you contribute to KiwiSaver up to a maximum of $1042 in a year.

It may make sense to aim to at least contribute this much each year to ensure you get the full Government credit. You could set a reminder to check each May, to make sure you’re on track for the end of the KiwiSaver year at the end of June.

Then, what you do in terms of money you wish to invest beyond that amount could be decided in accordance with a wider retirement savings plan. Sometimes KiwiSaver can be a good option but in other cases self-employed people opt for investment funds that don’t lock the money in.

We are here to help

If you would like advice on KiwiSaver, assistance with your other investments or your retirement goals, get in touch with the expert SHARE team. Our professional advisers can help you to identify your goals and devise appropriate strategies to help you achieve them.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.