Kiwi savings accounts: Summary of key features
06 Apr 2005
Kiwi Savings Accounts are lifetime savings accounts, and over time will be held by all New Zealander. On establishment of the scheme, Kiwi Savings Accounts will be created automatically for all who are earning taxable income and at birth.
Kid’s savings
• Individual accounts will be established automatically at birth, with a $500 endowment by the government. Repeat endowments of $500 will be made at age 5 and 10.
• For voluntary contributions into the account of up to $200 p.a. the government will provide a matching contribution of 1:1, until age 18. Additional contributions are also welcome.
• This money - except for the additional contributions - will accumulate tax free until age 18. After that, returns will be taxed in the standard way.
Tax cuts
• A two percentage point across the board reduction in the personal marginal tax rate will be diverted into the individual’s savings account in the form of an annual lump sum contribution - this will reduce the 33c tax rate to 31c, for example, and the 39c tax rate to 37c.
• 2% of everyone’s taxable income will be saved in this way, including those who are receiving welfare benefits.
Matched savings
• For voluntary contributions into this account of up to $1000 p.a. the government will provide a 0.5:1 matching contribution.
• There will be a supplemental match of 0.5:1 for those in the lowest tax bracket (earning below $38,000), to bring the match to 1:1.
• Other parties, such as employers, can make direct and matching contributions to the account.
Withdrawals
• Funds can be withdrawn from the account to finance education and the repayment of student loan debt (the portion that relates to tuition costs); to finance the deposit on a first home; to finance retirement; and for transfers to the accounts of children.