A KiwiSaver savings suspension — commonly called a contribution holiday — lets you temporarily stop deducting KiwiSaver contributions from your pay. It can provide short-term cash flow relief, but it comes at a real cost. Here’s how it works and when it makes sense.
What Is a KiwiSaver Savings Suspension?
A savings suspension is a formal period during which your employee contributions are paused. Your employer stops deducting KiwiSaver from your pay, and you receive your full gross pay (minus tax) instead.
It does not close your KiwiSaver account — your existing balance stays invested and continues growing (or fluctuating) as normal.
Eligibility
To apply for a savings suspension, you must:
- Have been a KiwiSaver member for at least 12 months
- Apply through IRD (myIR or form KS6)
There is no financial hardship test. You don’t need to justify why you want to pause — after 12 months of membership, it’s your right.
New members (less than 12 months in KiwiSaver) cannot apply for a suspension. The only exception is the 2–8 week opt-out window when first auto-enrolled.
How Long Can You Suspend?
| Suspension detail | Rule |
|---|---|
| Minimum suspension period | 3 months |
| Maximum suspension period | 1 year per application |
| Can you renew? | Yes — unlimited renewals |
| Can you resume early? | Yes — contact IRD to restart at any time |
You can stay on a savings suspension indefinitely by renewing each year. There is no lifetime limit. However, each renewal requires a new application.
What Happens to Employer Contributions?
When your savings suspension is active, employer contributions also stop. Employers are only required to contribute when you are making employee contributions. This is the most significant financial cost of a suspension.
For someone earning $70,000:
- Employer contribution at 3%: $2,100/year
- Employer contribution during full-year suspension: $0
A one-year suspension costs you $2,100 in employer contributions alone — plus the compounding growth that money would have generated over the remaining years to retirement.
What Happens to the Member Tax Credit?
During a savings suspension, you’re not contributing — so you won’t accumulate contributions toward the MTC threshold.
- MTC requires at least $1.00 contributed to earn any amount
- Full MTC ($521.43) requires $1,042.86 in contributions for the KiwiSaver year
- If you’re on suspension for all of 1 July–30 June, you receive $0 MTC
You can make voluntary lump sum contributions during a suspension and still earn MTC — but this requires deliberate action (see lump sum contributions guide).
How to Apply for a Savings Suspension
Via myIR (easiest):
- Log in to myIR at ird.govt.nz
- Navigate to KiwiSaver
- Select “apply for a savings suspension”
- Choose your start date and duration (3–12 months)
- Submit — IRD notifies your employer
Via paper form: Download form KS6 from ird.govt.nz, complete it, and send to IRD.
IRD will notify your employer once the suspension is approved. It may take 1–2 pay cycles before the change takes effect.
How to End a Suspension Early
If your financial situation improves and you want to restart contributions:
- Log in to myIR and cancel the suspension, or
- Contact IRD directly
Your employer will restart deductions within 1–2 pay cycles of IRD notifying them.
The Real Cost of a Suspension
A savings suspension feels like getting extra cash now — but the cost is real and compounds over time.
Illustrative example — 1-year suspension at age 35, earning $75,000:
| Loss | Amount |
|---|---|
| Employee contributions paused (3%) | $2,250 |
| Employer contributions lost (3%) | $2,250 |
| MTC lost | $521 |
| Total immediate loss | ~$5,021 |
| Lost compounding at 7% over 30 years | ~$38,000 |
Illustrative only. Actual outcomes depend on fund returns and individual circumstances.
A one-year suspension at 35 could cost you approximately $38,000 at retirement. At 25, the compounding effect is even greater.
When Does a Suspension Make Sense?
Suspensions are most justifiable when:
- You have high-interest debt (credit card, personal loan) — paying off 20%+ interest debt is mathematically better than KiwiSaver contributions at ~7% returns
- You’re experiencing genuine cash flow hardship — covering rent and food takes priority
- You’re between jobs and not receiving a pay cheque — though note you can still make voluntary contributions if you have other income
- You’re on parental leave and not receiving salary (though see: KiwiSaver on parental leave)
Suspensions are not recommended when:
- The motivation is wanting more spending money
- You’re a young member — the compounding cost is enormous
- The suspension would last multiple years
- You have access to other options (reducing discretionary spending, refinancing debt)
Alternatives to a Savings Suspension
| Option | Impact |
|---|---|
| Reduce contribution rate to 3% (minimum) | Keeps employer match and MTC; reduces cash flow impact |
| Reduce contribution rate temporarily (via myIR) | More flexible than full suspension |
| Make minimum contributions + voluntary top-ups when possible | Preserves employer match |
Reducing your contribution rate to 3% is almost always preferable to a full suspension, because it preserves the employer match.