National Provident Fund

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Locked-In Compared with KiwiSaver

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  1. How do the features of the Locked-in Schemes compare with KiwiSaver?
    FeatureLocked-in SchemeKiwiSaver
    Locked-in (see Q10)YesYes
    $1,000 kick start (see Q22)NoYes until 2015 only
    4% minimum annual earnings rate (see Q20)YesNo
    Government Guarantee (see Q20)YesNo
    Early withdrawals (see Q11)YesYes
    Member tax credit (see Q21)YesYes
    Forfeit of tax credits on permanent emigration to Australia (see Q11)YesNo
    Compulsory employer contributions (see Q16)YesYes
    Access to first home purchase subsidy (see Q24)YesYes
    Note the definition of 'salary' for contributions is different under the Locked-in Schemes and KiwiSaver. For Locked-in Schemes salary is generally before tax base salary (excluding bonuses and allowances). For KiwiSaver schemes salary is before tax salary including bonuses and most allowances.
  2. How does KiwiSaver affect the Existing Schemes?
    KiwiSaver does not have any direct impact on the Existing Schemes. Employees may join KiwiSaver and continue contributing to their Existing Scheme. Employer contributions to an Existing Scheme are likely to offset any compulsory employer contribution obligation to a KiwiSaver scheme or Locked-in Scheme.
  3. Can an NPF member continue to make contributions to their Existing Scheme and at the same time join a Locked-in Scheme?
    Yes, members may make contributions to more than one NPF scheme (subject to eligibility, particularly for those schemes listed on the first page of these questions), provided the employer’s payroll department is willing to make and remit the additional deductions.
  4. Are the Locked-in Schemes KiwiSaver “compliant”?
    No, the Locked-in Schemes are not KiwiSaver compliant. A fundamental requirement of becoming a KiwiSaver Scheme is that the scheme must be available to new members. NPF schemes have been closed to new members since 1 April 1990 and therefore cannot meet this requirement.
  5. Can an NPF member make contributions to both a Locked-in Scheme and KiwiSaver?

    While NPF members can contribute to both, there is little to be gained by contributing to a Locked-in Scheme and a KiwiSaver scheme. This is because –

    - member tax credits are only available on contributions at a rate of 50c per dollar up to a maximum tax credit contribution of $521.43 per year, and
    - both the Locked-in Scheme and a KiwiSaver scheme require a minimum member contribution rate of 3% of salary as at 1 December 2013, that will be locked-in until the New Zealand superannuation qualification age.

    If a member wishes to contribute more than, say, 6% of their base salary to a scheme, they may wish to consider contributing 3% to a Locked-in Scheme, with the balance of 3% going to an Existing Scheme. Contributions to an Existing Scheme are not locked-in.

    In some cases a member who contributes to an Existing Scheme, and whose employer is also contributing to that scheme, could choose to contribute to a Locked-in Scheme or KiwiSaver scheme, and trigger the compulsory employer contribution obligation in relation to the locked-in amount, in addition to their existing employer subsidy.

    However, the KiwiSaver Act provides that in relation to members who were employees before 1 April 2008 (and who had access to a registered superannuation scheme as at 17 May 2007), and for whom employer contributions are being made (or were agreed to be made) before 1 April 2008 (which vest within 5 years), those contributions count as compulsory contributions.

    In relation to any other members, as the employer contribution rate under the trust deeds for the Pension National and Lump Sum National Schemes is set by agreement between the employer and the member, the additional burden on the employer can be alleviated by the employer agreeing with its employees to reduce the contribution rate to the Existing Scheme. Your employment agreement may also impact on how the compulsory employer contribution obligations are affected in this situation, and your employer is unlikely to agree to pay compulsory employer contributions to a Locked-in Scheme as well as a KiwiSaver Scheme.

    It is not possible to transfer an account a member has with a KiwiSaver scheme, to a Locked-in Scheme.

  6. Does the new Trans-Tasman portability of retirement savings regime, which allows transfer of superannuation savings between certain Australian and New Zealand superannuation schemes, apply to the NPF schemes?
    No, as this regime only applies to transfers to and from KiwiSaver schemes.