For every dollar eligible Kiwis invest in their KiwiSaver, up to $1,042.86 in a year, the Government will contribute 50 cents. Photo / 123RF
For every dollar eligible Kiwis invest in their KiwiSaver, up to $1,042.86 in a year, the Government will contribute 50 cents. Photo / 123RF
Opinion by Murray Harris
Murray Harris is Head of KiwiSaver, Milford Asset Management.
THREE KEY FACTS
Kiwis missed out on an estimated $500 million in government KiwiSaver contributions last year.
Eligible members can get up to $521.43 annually if they contribute $1,042.86 in a year.
Choosing the right KiwiSaver fund is crucial for maximising returns and achieving savings goals.
The KiwiSaver numbers are stark and don’t lie. Last year Kiwis have collectively missed out on an estimated $500 million in government contributions.
That’s hundreds of thousands of KiwiSaver members who didn’t receive a boost of up to $521.43 to their nest egg in July.
Given yourKiwiSaver may be one of your largest assets, perhaps second only to your house, consider this a reminder to add KiwiSaver to your New Year’s resolutions list, to make sure you’re among those reaping all the benefits, now and in the future.
For every dollar eligible Kiwis invest in their KiwiSaver, up to $1,042.86 in a year, the government will contribute 50 cents. In the year to June 2024, that totalled around $1 billion in contributions, according to figures from IRD.
That additional $521.43 has the potential to make a big difference to your first home deposit or retirement fund.
According to the 10-year average annual return rates in Morningstar’s KiwiSaver Survey for the 2024 September quarter, a decade’s worth of government contributions (at the maximum level of $521.43 a year) in an average growth fund would have earned an 8.2% per annum return, which equates to $8772.60, including accrued returns*.
In a balanced fund with a 6.7% per annum return, a decade’s worth of government contributions equates to $8100.36, while in a conservative fund with a 4.3% per annum return, the contributions will equate to $7142.53, including accrued returns.
All of this is on top of your own, and your employer’s, KiwiSaver contributions.
When looking at the estimated $500m in unclaimed government contributions, in 10 years that would have grown to over $1 billion based on the 10-year average return for a growth fund – and that’s not taking into account further unclaimed government contributions that would also accumulate over subsequent years.
People who work full time and regularly contribute from their salary or wages to their KiwiSaver will likely have contributed enough to receive the full government contribution. But it pays to check. Parents and caregivers who take time off paid work for their children are more likely to miss out.
It’s important to note your employer contribution or any transfers from Australian Superannuation do not count towards receiving the government contribution. If you’re not sure you’re meeting the $1,042.86 contribution threshold, you can easily check online.
Using your “MyIR login” at www.ird.govt.nz/kiwisaver, you can see your transactions and filter them by contribution type and timeframe.
If it looks likely you will not contribute enough to qualify for the full $521.43 in July 2025, you can increase your regular contribution or make a one-off payment to get you to $1,042.86. But remember, you’ll still get 50 cents for every dollar you put in up to $1,042.86, so even if you’ve only contributed $500 to your KiwiSaver account in the year to 30 June, you’ll still get $250 from the government. But who wouldn’t want to maximise their entitlement to the $521.43?
Contribution rates can be set to 3%, 4%, 6%, 8% or 10% of your salary or wages and online calculators, such as the Sorted Retirement Calculator, will show how each of these rates shapes your contribution.
You can also make your additional contributions multiple times across the year, or in a single one-off payment. As a starting point, weekly payments of $21 into your KiwiSaver account will make sure you qualify for the maximum government contribution.
Just don’t forget your $1,042.86 in contributions need to be received by your provider before mid-June this year, as it can take several business days for contributions to be processed ahead of the June 30 deadline.
Taking the time to choose the right fund
While the government contribution is the result of your total contributions in a single year, it’s also important to take a long-term view to ensure you’re progressing towards your savings goals, whether that’s home ownership or retirement. One key way to achieve those goals is to choose the right KiwiSaver fund type for you.
Hundreds of thousands of Kiwis remain in a default, balanced fund that aims to deliver “middle of the road” risk and returns. It’s a deliberate setting to give investors time to find the right fund and provider, but with so many members still in their default fund, it’s clear many haven’t actively chosen their fund or provider. If you’re included in that statistic, it might be time to check your KiwiSaver is in the right fund.
Murray Harris, Head of KiwiSaver, Milford Asset Management.
If you’re more than a decade away from buying your first home or retiring, a fund with a longer investment time horizon might be something to consider. Growth funds invest primarily in shares, which can deliver higher returns over the long term, but in doing so, they will be expected to experience more ups and downs in value along the way.
If, however, you have a shorter investment time horizon (i.e. you’re planning to buy your first home in the next couple of years, or nearing retirement), a more conservative-oriented fund with lower risk, and less volatility, may be more appropriate.
No matter your stage in life, working out your goals, appetite for risk, and investment timeframe to help choose the appropriate KiwiSaver fund for you is important and doesn’t have to be daunting. Some KiwiSaver providers offer free financial advice in person or online or you might like to speak to a Milford financial adviser near you.
With a few questions to yourself, or a financial adviser, you can ensure you’re taking advantage of all KiwiSaver has to offer your future.
* The Morningstar KiwiSaver Survey for the 2024 September quarter can be found here.
Disclaimer: This article does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Past performance is not a reliable indicator of future performance. Investment involves risk and returns can be negative as well as positive. Milford Funds Limited is the issuer of the Milford KiwiSaver Plan and Milford Investment Funds. Please read the relevant Milford Product Disclosure Statement at milfordasset.com. Before investing you may wish to seek financial advice. For more information about our financial advice services please visit milfordasset.com/getting-advice. Financial Adviser Disclosure Statements are available on request free of charge.
Murray Harris is head of KiwiSaver, Milford Asset Management.
