Once you’ve got KiwiSaver sorted, many New Zealanders start looking at direct share investing — through platforms like Sharesies, InvestNow, Hatch, or Kernel. The question becomes: should you put extra money into KiwiSaver or invest in shares directly?
The answer is nuanced, and for most people, the right approach is both — in the right order.
What’s the Difference?
| KiwiSaver | Direct shares (Sharesies, InvestNow, etc.) | |
|---|---|---|
| Access | Locked until 65 (with exceptions) | Fully liquid — sell any time |
| Employer match | Yes — minimum 3% | No |
| Government bonus (MTC) | Yes — up to $521.43/yr | No |
| Tax treatment | PIE (capped at 28%) | FIF rules (39%+ possible) or FDR method |
| Fees | Fund fees (0.31%–1.35%) | Platform fee + fund fee or brokerage |
| Diversification | Built-in (fund holds many assets) | DIY — depends on what you buy |
| Minimum | $0 to start | $1 on most platforms |
| Investment choice | Limited to provider’s fund range | Hundreds of ETFs, shares, funds |
Priority Order: KiwiSaver First, Then Shares
Before investing a dollar in shares, capture KiwiSaver’s guaranteed returns:
1. Employer match (minimum 3% contribution)
Your employer’s 3% contribution is an immediate 100% return on your employee 3%. No share portfolio can match this risk-free guaranteed return. If you’re not at 3%, get there first.
2. Member Tax Credit
Contribute at least $1,042.86/year and receive $521.43 from IRD — a guaranteed 50% return. Already captured if you’re at 3%+.
3. Emergency fund
Before shares, ensure 3–6 months of expenses in an accessible savings account. Shares and KiwiSaver are not emergency funds.
Only after capturing employer match + MTC + emergency fund should you consider whether to increase KiwiSaver above 3% or invest in direct shares.
The Tax Advantage of KiwiSaver (PIE)
KiwiSaver is a Portfolio Investment Entity (PIE) fund. Your returns are taxed at your Prescribed Investor Rate (PIR) — a maximum of 28%, even if your income tax rate is 33% or 39%.
This is a meaningful tax advantage that direct share investing does not provide for high earners.
For direct shares (New Zealand shares):
- Dividends: taxed at your marginal income tax rate (up to 39%)
- Capital gains: generally not taxed (no CGT in NZ — but watch the bright-line test for property)
For international shares (via Sharesies, Hatch, etc.):
- Subject to the Foreign Investment Fund (FIF) rules if your offshore portfolio exceeds $50,000
- Under the Fair Dividend Rate (FDR) method, 5% of your opening portfolio value is deemed income, taxed at your marginal rate — even if your actual return is less than 5%
- This can mean paying tax on unrealised gains in a flat or down year
For a 33% or 39% taxpayer, the 28% PIR cap in KiwiSaver is a genuine after-tax return advantage vs offshore shares under FIF.
The Flexibility Advantage of Direct Shares
KiwiSaver is locked. Once money goes in (above the mandatory minimum), it’s inaccessible until 65 in most circumstances.
Direct share investing is fully liquid. You can sell and access your money for:
- Emergency expenses
- House deposit (supplement to KiwiSaver)
- Business investment
- Anything else
If liquidity matters — and for most people under 55, it does — this is a strong argument for holding some investment assets outside KiwiSaver.
Investment Choice: Shares Win on Flexibility
KiwiSaver funds are limited to your provider’s fund range — typically conservative, balanced, growth. Some providers offer specific fund types (ethical, index, sector-specific), but choice is constrained.
Direct investing via Sharesies, InvestNow, or Hatch lets you:
- Buy NZ and Australian shares directly (NZX, ASX)
- Access US and global shares
- Choose specific ETFs (e.g. Vanguard, iShares)
- Build a portfolio tailored to your views
- Access ethical/ESG funds unavailable in KiwiSaver
For investors who want control and specificity, direct investing is far more flexible.
Platform Comparison: NZ Investing Options
| Platform | Best for | Fees |
|---|---|---|
| Sharesies | NZ/AU/US shares, low minimums | 0.5% (under $3,000), 0.1% (over) + fund fees |
| InvestNow | Managed funds, low-cost index funds | Free (fund fees apply) |
| Kernel | Index funds (also has KiwiSaver) | 0.25%–0.39% + $60/yr flat |
| Hatch | US shares direct | US$3/trade + FX fee |
| Smartshares | NZ ETFs via NZX | 0.35%–0.75% management fee |
Note: Many platforms (Kernel, InvestNow) offer both KiwiSaver and non-KiwiSaver investment options. You can use the same provider for both.
When More KiwiSaver Beats Direct Shares
Increase KiwiSaver above 3% when:
- You’re in a low-fee provider (Simplicity, Kernel) — fees are low enough that the PIE tax advantage and long lock-in compound significantly
- You have 25+ years to retirement — the locked nature matters less with a very long horizon
- Your income is $70,000+ (33% tax rate) — the PIE cap at 28% provides meaningful after-tax return uplift
When Direct Shares Beat Extra KiwiSaver
Choose direct shares over extra KiwiSaver when:
- You may need the money before 65 (house deposit top-up, business, life events)
- You want specific investment exposure not available in KiwiSaver funds
- Your income is below $48,000 (17.5% tax rate) — the PIE advantage is minimal at lower tax rates
- You already have a well-funded KiwiSaver and want a separate accessible investment portfolio
A Practical Framework
| Situation | Action |
|---|---|
| Not at 3% KiwiSaver | Increase to 3% immediately |
| MTC not being captured | Ensure $1,042.86/yr minimum contribution |
| No emergency fund | Build 3–6 months in savings first |
| High marginal tax rate (33%+) | Extra KiwiSaver above 3% has tax advantage |
| May need money before 65 | Invest in direct shares / managed funds outside KiwiSaver |
| Want specific funds/ETFs | Direct investing |
| Want simplicity | Maximise KiwiSaver first |
The ideal for most people: 3%+ in KiwiSaver (capturing all guaranteed benefits) + growing a separate accessible investment portfolio alongside it.
Frequently Asked Questions
Can I invest in shares through my KiwiSaver? Indirectly — KiwiSaver growth funds invest in global shares as part of the fund. You’re not picking individual stocks, but your money is invested in equities. For direct share picking, you need a separate brokerage account (Sharesies, Hatch, etc.).
Is Sharesies better than KiwiSaver? They serve different purposes. KiwiSaver has the employer match and MTC — guaranteed returns Sharesies cannot provide. Sharesies offers liquidity and investment choice KiwiSaver doesn’t. Most financially savvy NZers use both.
Does investing in shares through Sharesies affect my KiwiSaver? No — they’re completely separate. Your Sharesies investments don’t affect KiwiSaver contributions, MTC eligibility, or your KiwiSaver balance in any way.
What is InvestNow vs KiwiSaver? InvestNow is a non-KiwiSaver investment platform offering managed funds and index funds. You can invest outside the KiwiSaver structure with no lock-in. InvestNow also has a separate KiwiSaver option (InvestNow KiwiSaver Scheme).