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RNZ News
5 days ago
- Business
- RNZ News
Are you missing out on your last chance for $521 of 'free money'?
The Kiwisaver contribution cost the Government about $1 billion last year. Photo: 123RF Time is running out for KiwiSaver members to ensure they get the full $521 in their accounts from the Government this year - the last time that amount will be available. When people contribute at least $1042 into their KiwiSaver accounts in the year to 30 June, they can receive the maximum $521 from the Government. Those who contribute less receive the credit at a rate of 50c per $1 contributed. But this is the last year that $521 will be available - from next year, the contribution will be halved and people who earn more than $180,000 a year will not qualify for any credit at all. Anyone who earns more than about $34,000 and contributes 3 percent of their income to KiwiSaver will probably have contributed enough to get the maximum. But each year, many people miss out. Only about two-thirds of all KiwiSaver members receive the contribution. For those missing out it may be because they are not working, on a contributions holiday or self-employed and not contributing enough. Of those receiving a contribution, 77 percent received the full $521.43. The contribution cost the Government about $1 billion last year. A Fisher Funds spokesperson said about 60 percent of its members usually received the contribution. There was usually a spike in contributions in the last week of June, she said. "We ran a campaign and emailed clients who hadn't yet reached the $1042 threshold. Of those more than 4000 have contributed the full amount. And 1500 have made a deposit to get the 50c for every dollar they have contributed." Westpac said over the last two years, 44 percent of eligible members did not receive the maximum top-up. "People who are in a financial position to top up their KiwiSaver contributions to $1042.86 for the year should do so, to maximise their retirement savings for the year," said Nigel Jackson, Westpac KiwiSaver scheme provider BT Funds Management chief executive said. "There may be a variety of reasons why people haven't contributed up to the threshold, for example, some members may be on parental leave, some may be working part time, or others may have temporarily suspended contributions. "However, if people can afford to top up their contributions they should do, so as every dollar contributed up to the threshold has an immediate investment return of 50 percent." At Pie Funds, chief executive Ana-Marie Lockyer said about 85 percent of members received the full amount. "Government contributions can have a big impact on KiwiSaver balances at retirement, and it's a shame so many people are missing out. As an industry there's always more we can do to boost awareness and ensure more KiwiSavers benefit, recognising that even following the recent budget changes this contribution along can grow to more than $41,000 over a 16-year old's working life." The Retirement Commission said, for people earning less than $30,000, the contribution as expected to create up to 20 percent of their balances at 65 on the existing settings. Once the government contribution is halved, it will be 6 percent to 11 percent. "For members earning $100,000, the percentage point change is much smaller, with the government contribution reducing from 5 percent down to 1 percent of accumulated balance, and from 3 percent down to 0 percent for members with earnings of $180,000."
RNZ News
5 days ago
- Business
- RNZ News
KiwiSaver providers hope public support for contribution increases will see default rates move higher
Financial Services Council chief executive Kirk Hope. Photo: RNZ/ Dan Cook KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher. The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget. From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent. But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000. The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure. Among National voters, almost 80 percent supported the change. But only 23.7 percent of total voters supported the move to halve the contribution rate, and fewer than half of National supporters. Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings. He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates. "I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time." He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow. "They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement. "Having a long-term vision like that is really important." Read more: Australia soon to be second in world for retirement savings as superannuation pool soars Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected. "We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something." He said there should be a bipartisan agreement about a long-term strategy for retirement income. He said it was also worth discussing other steps the government could take, such as adjusting the tax settings. "Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system." Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase. "In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer. "Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else." She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life. "I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough. "While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity. "What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table. "So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year." Finance Minister Nicola Willis says the changes will help Kiwis save more. Photo: RNZ / Mark Papalii A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable. "For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000. "The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
