One of the reasons KiwiSaver was invented was to help people save up to buy their first home by making regular contributions.
The government says while people aren't working, their KiwiSaver accounts continue to accrue interest.
However, it won't be a large amount until they start contributing from their new wage at their next job.
KiwiSaver deductions are generally made from a member’s regular salary/wage and matched by their employer. If a KiwiSaver member is not employed, the KiwiSaver deductions from their wages and employer contributions stop.
The contributions already held by the scheme provider will continue to be managed while no contributions are being made. There are also options available for members to withdraw KiwiSaver contributions for hardship reasons, which are considered on a case-by-case basis by scheme providers.
But the government has changed an important part of KiwiSaver to help savers "investing for relatively low-risk" get a higher return from next Wednesday, December 1, Māori financial commentator Taurua Grant says.
“The government sought out a plan which will help many who aren't so fluid in this type of investment. The problems users end up falling into is investing for a relatively low-risk.”
When people join up to KiwiSaver, most can't be bothered with choosing a particular bank. So they are assigned a default provider from a list the government chooses. But until next week that has meant their contributions are invested in conservative funds that grow very slowly and don't make much profit.
The government has now changed the rules, and changed default providers so "default" savers go into balanced funds which are riskier but make more profits.
“If you’re a young person then you should invest more,” Grant says. “It's a high risk for a high return that you gain.”
“So it's different for seniors because they need to be more cautious and invest lower. So they should only focus on conservative growth.”