The Inland Revenue Department is to pay millions of dollars to compensate more than 640,000 KiwiSaver members whose employer contributions were delayed in getting to their providers.
The problems were caused when the IRD moved KiwiSaver to a new technology platform in April last year and there was a delay in passing on some employer contributions to people's KiwiSaver accounts.
IRD will pay out just over $6.6m, an average of just over $10 per person.
As part of the switchover on April 17, IRD decided to hold some KiwiSaver contributions for review to ensure the correct amounts were going through to member accounts.
By May 31 last year it had passed on 85 per cent of the KiwiSaver contributions it held but since then it has been working through the remainder, which had taken time because of the need to confirm the amounts to be passed on.
More than three million people belong to KiwiSaver and thousands of dollars pass through it from employers to KiwiSaver providers every day.
But in October last year the Herald began receiving complaints about delays with some waiting up to 10 months for their money to go from their employer to their KiwiSaver provider.
One woman, who wished to remain anonymous, said potentially hundreds of staff at the company she worked for were still waiting for a January employer contribution to be passed on to their KiwiSaver schemes.
She said the company's human resources person had been chasing up the issue every month since June but by October it still hadn't been be resolved.
"As of mid-October we were still waiting, and our HR department was still chasing on our behalf, and had not been given any indication by IRD as to when the issue would be resolved."
The woman decided to take the matter into her own hands and raised a complaint directly with the IRD in late October. The money was finally passed on to her provider in early November.
Another woman waited six months for her March employer contribution - which should have been just under $300 - to be passed on.
The delays left KiwiSaver members feeling frustrated and calling for compensation after potentially missing out on investment returns they would have got had their money been with their KiwiSaver scheme.
KiwiSaver funds performed strongly in 2020 reflecting strong bounce-backs in the sharemarket after falls driven by Covid-19.
The IRD normally pays interest at a legislatively set rate on contributions held by it but since May 8 the interest rate has been set at zero per cent.
In November the IRD admitted there had been "unacceptable delays" in transferring some KiwiSaver employer contributions to providers.
At the time Revenue Minister David Parker said it was considering compensation by way of ex gratia payment.
But compensation would need Cabinet approval.
An IRD spokeswoman confirmed today that contributions had now been passed on to KiwiSaver scheme providers.
"Inland Revenue apologises for the delay."
She said Inland Revenue was this week making an ex gratia payment to people for the missed investment return on their contributions.
The spokeswoman said the payment was based on the amount that was delayed and the time involved.
"It assumes contributions were invested in a growth fund which earned the highest investment return."