Kiwisaver: Beneficiaries receive full use of scheme

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I have found it very difficult to get information about KiwiSaver for beneficiaries.

I have been told that beneficiaries do not qualify for the government tax credits, for example.

Would a beneficiary qualify for the home deposit if they made a yearly annual deposit, which my son does once he knows each year that he can live without that money?

Even though KiwiSaver is touted as a workplace savings scheme you don't need to be in work to reap some of the benefits.

ASB's head of wealth products, Roger Clayton, has the rundown on how your son can also gain from KiwiSaver even though he isn't in work: "To be eligible, a KiwiSaver member must be over the age of 18, living in New Zealand, and not yet eligible for retirement withdrawals.

"The member tax credit is not restricted to New Zealanders in paid employment," Clayton says.

"People who are receiving a benefit, self-employed, or stay-at-home parents are also eligible for this feature, and can maximise their entitlement by contributing at least $20 a week to their KiwiSaver account."

It sounds like your son is making some voluntary contributions each year to his KiwiSaver account, which is the only way beneficiaries can contribute as it won't be automatically deducted from their benefit payments.

If he does as Clayton suggests and puts $1043 into his KiwiSaver account each year then the government will contribute $521.43 regardless of whether he is working.

The "KiwiSaver year" runs from the beginning of July to the end of June, so the calculations are based on contributions made over that period.

Your provider may have some rules around the frequency and timing of contributions, but generally speaking KiwiSaver providers are open to regular payments and one-off payments in advance of the June 30 deadline.

Any provider worth its salt should also be in touch with you a month or so out from that KiwiSaver year end with some advice on whether you've contributed enough to get the full member tax credit and how to make a top-up payment to get most out of the member tax credit.

This doesn't just affect those that are self-employed, beneficiaries or not currently working.

If you're on a salary of less than $35,000 and contributing to your KiwiSaver at the current default rate of 4 per cent then you may need to make an extra payment to get you across the line.

It could be a matter of a couple of dollars for someone earning $26,000 or several hundred dollars for someone on $15,000.

While it makes sense to get the maximum member tax credit - it works out at an extra 50c for every $1 you put in up to the $521.43 maximum payment - even if you don't contribute the full $1043 you will get a partial payment.

Currently, once your son has been in KiwiSaver for three years he can withdraw his contributions, any contributions an employer has made and the investment earnings to put towards a first home.

His KiwiSaver provider will be able to step him through the process for tapping those funds.

The first home deposit subsidy, an additional payment available to those on modest incomes looking to buy their first home, is managed by Housing New Zealand.

Those earning $80,000 or less, or a couple or several people buying a first home together earning $120,000 or less, can get an extra payment equivalent to $1000 a year up to a maximum of $5000 if they've been making regular contributions for at least three years.

Just to be clear, it is an additional payment on top of the KiwiSaver first home withdrawal but there are a few more hoops to jump through to qualify.

There are some restrictions around the maximum house price, for example, and potential home buyers need to have already saved a 10 per cent deposit on a home they intend to buy.

The eligibility criteria include a requirement to be making regular contributions to your KiwiSaver for at least the last three years.

At the moment beneficiaries need to be contributing at least 3 per cent of their yearly income to KiwiSaver, although that minimum contribution rate has changed over the years.

It was 4 per cent between 2007 and early 2009, before dropping to 2 per cent until the current rate came into effect in 2013.

Housing New Zealand will assess your son's application for a housing deposit subsidy but it would pay to either check its website tinyurl.com/nzfirsthomedeposit or phone 0508 WELCOME (0508 935 266) to make sure he ticks all the eligibility boxes when it comes time to buy his first home.

• Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication. It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.