KiwiSaver contributions are not compulsory forever. If financial pressure makes it difficult to keep contributing, you can apply for a savings suspension — a temporary pause on your KiwiSaver deductions.
This guide explains how it works, what it costs you, and when it makes sense.
What Is a Savings Suspension?
A savings suspension (previously called a “contributions holiday”) lets you temporarily stop making KiwiSaver employee contributions from your pay. During a savings suspension:
- Your contributions stop — nothing is deducted from your wages
- Your employer’s contributions also stop — employers only contribute when you contribute
- Your KiwiSaver balance stays invested — it continues to earn returns (or losses) in your chosen fund
- You stop accumulating MTC — if you’re not contributing, you won’t earn the member tax credit for that period
Savings Suspension Rules
| Rule | Detail |
|---|---|
| Minimum suspension period | 3 months |
| Maximum per application | 1 year |
| Can you renew? | Yes — unlimited renewals |
| Who approves it? | IRD |
| When can you apply? | After 12 months of KiwiSaver membership |
| Notice period | IRD processes applications; allow 1–2 weeks |
The 12-month rule: You must have been a KiwiSaver member for at least 12 months before your first savings suspension. After that, there’s no minimum active-contribution period between suspensions — you can apply to suspend again immediately after one ends.
How to Apply
- Log in to myIR at ird.govt.nz
- Navigate to KiwiSaver → Apply for savings suspension
- Select your suspension period (3–12 months)
- IRD approves and notifies your employer
- Your employer stops deducting contributions from your next pay run
You do not need to give a reason for your suspension — IRD does not require financial justification for a standard savings suspension.
The Cost of Pausing: What You Actually Lose
Lost employer contributions
Your employer contributes at least 3% of your gross salary while you contribute. If you suspend, that employer contribution stops.
On a $70,000 salary, 3 months of suspension costs:
- Lost employer contributions: $70,000 × 3% ÷ 4 = $525
- Lost MTC (pro-rated): ~$130
That’s roughly $655 in lost contributions for a 3-month suspension, before accounting for the lost compounding returns on that money over the remaining years until retirement.
Over 25 years at 7% annual returns, $655 in lost contributions at age 40 would have grown to approximately $3,500 by retirement.
A full 12-month suspension on the same salary costs approximately:
- Lost employer contributions: $2,100
- Lost MTC: $521
- Total lost: $2,621 → grows to ~$14,000 over 25 years
Lost member tax credit (MTC)
The MTC is $521.43/year, earned by contributing at least $1,042.86 in a KiwiSaver year (1 July – 30 June). If you suspend mid-year, you may partially earn the MTC for the months you contributed.
Example: Contribute January–June (6 months, $20.06/week = ~$521). You’d earn ~$260 MTC — half the annual maximum. A partial-year suspension doesn’t necessarily forfeit the full MTC.
Temporary Rate Reduction: An Alternative to Full Suspension
Instead of suspending entirely, you can reduce your contribution rate to the minimum of 3%. This keeps the employer match and MTC flowing while reducing the deduction from your pay.
| Contribution rate | Take-home impact ($70k salary) | Employer match kept? | MTC still earned? |
|---|---|---|---|
| 8% | -$5,600/yr from gross | Yes | Yes |
| 6% | -$4,200/yr from gross | Yes | Yes |
| 4% | -$2,800/yr from gross | Yes | Yes |
| 3% (minimum) | -$2,100/yr from gross | Yes | Yes |
| 0% (suspended) | $0 deducted | No | Partially or No |
Dropping from 8% to 3% saves you $3,500/year in take-home pay, while still capturing the full employer match and MTC. For most short-term cash flow problems, this is a better solution than a full suspension.
To change your contribution rate, notify your employer in writing — you don’t need to go through IRD. The change takes effect from your next pay run.
See KiwiSaver contribution rates for the full breakdown.
When a Savings Suspension Makes Sense
Genuine short-term financial hardship
If you’re facing an unexpected financial shock — large medical bill, job loss, relationship breakdown — and every dollar matters, a savings suspension can free up cash immediately. This is the intended use case.
Self-employment transition
If you’re leaving employment to become self-employed, your automatic KiwiSaver contributions stop anyway (as contributions are employment-based). A formal suspension isn’t necessary, but you should be aware that you can still contribute voluntarily as a self-employed person.
Overseas move
If you’re moving overseas temporarily, your NZ employment income stops and KiwiSaver deductions stop automatically. A suspension application isn’t necessary unless you’re still receiving NZ employment income while overseas.
When a Savings Suspension Doesn’t Make Sense
Paying off a NZ student loan
If you’re pausing KiwiSaver to accelerate student loan repayment, you’re giving up the employer match (an immediate 100% return) to repay a 0% interest loan. For most NZ-based borrowers, this is a poor trade. See KiwiSaver and student loan.
Investing elsewhere instead
Some people consider suspending KiwiSaver to invest in shares or property. Unless you have a compelling reason to believe the after-tax, after-fee return from another investment exceeds the guaranteed employer match + MTC, KiwiSaver contributions are usually the priority.
Because you think the market is going to fall
KiwiSaver is a long-term investment. Trying to time market downturns by suspending and restarting contributions is rarely effective and causes you to miss employer match and MTC in the process.
What Happens to Your Balance During a Suspension?
Your existing KiwiSaver balance stays invested in your chosen fund throughout the suspension. It continues to grow (or fall) based on market returns. You do not lose what you’ve already accumulated — you simply stop adding to it during the suspension period.
Returning From a Suspension
Your suspension ends automatically on the date you specified. From the next pay run after your suspension ends, your employer restarts deducting contributions at your elected rate.
You can also end a suspension early — contact IRD via myIR to cancel before the end date.
Frequently Asked Questions
Can I suspend KiwiSaver in my first year of membership? No. You must have been a KiwiSaver member for at least 12 months before your first savings suspension. During the first year, contributions are compulsory (for employees).
Will my employer know I’ve applied for a savings suspension? Yes — IRD notifies your employer once a suspension is approved so they stop deducting contributions from your pay.
Can I make voluntary contributions during a savings suspension? Yes. A suspension stops the automatic employee deduction from your pay, but you can still make voluntary lump-sum contributions directly to your provider. Voluntary contributions count toward MTC eligibility.
Does a savings suspension affect my KiwiSaver first home eligibility? No — a savings suspension period does not reset your KiwiSaver membership years for first home withdrawal purposes. Your membership years continue to count from the date you first enrolled.
What if I don’t renew and my suspension expires — do contributions restart automatically? Yes. Once the suspension period ends, your contributions restart automatically from the next pay run. You don’t need to do anything.