Money - Shelley Hanna: Why there's no top-up for some KiwiSavers

KiwiSaver is regulated by the KiwiSaver Act 2006. The scheme's principal purpose is retirement savings — to provide extra funds for retirees alongside NZ Super. The annual Government top-up is an incentive for contributing members aged 18 to 64. It could also be regarded as a tax rebate (like Independent Earner Tax Credit) as KiwiSaver contributions come from tax-paid income.

The obvious reason that those over 65 don't qualify is that you are probably now receiving NZ Super. You do not have to be retired from work to get NZ Super as it is not income tested. A single person currently receives $981.46 per fortnight before tax ($25,518 gross per year). This is a welcome 'pay increase' for many New Zealanders who like you are still working at age 65. Topping up KiwiSaver accounts by $521 as well at this stage in life would not be a good use of taxpayer dollars.

New Zealand has a generous universal super. In fact, New Zealand is one of only four countries that have flat-rate universal superannuation, the others being Canada, Denmark and Russia. Around one quarter of the state's core operating expenditure in New Zealand goes on superannuation.

Currently a person may qualify for NZ Super if they are 65 or over and a New Zealand citizen, permanent resident, or hold a residence class visa. They must also be ordinarily resident in New Zealand, the Cook Islands, Niue or Tokelau when they apply. Importantly they must have lived in New Zealand for at least 10 years since they turned 20 and have lived in New Zealand, the Cook Islands, Niue or Tokelau (or a combination of these) for at least 5 years since they turned 50.

A person may qualify for NZ Super with less than 10 years residence if they have migrated to New Zealand from a country with which New Zealand has a social security agreement.

There are some Kiwis who are wealthy and do not need some or all of their NZ Super. If fact, 1per cent of over-65s don't even apply for NZ Super, saving the country around $110 million a year. Others choose to donate some or all of their Super to charity through websites such as spendmysuper.org.nz. This organisation supports 12 charities such as KidsCan, Women's Refuge and Child Poverty Action Group — aimed at helping deprived children.

Now that you are over 65 your KiwiSaver takes on different characteristics. Your account is unlocked (whether you choose to access your money or not). As you have observed, you no longer qualify for the Government top up. Your employer is no longer obliged to contribute 3% although some do. You can continue with your contributions (up to 10% through your wages) for as long as you wish. Once you stop working, your KiwiSaver funds can supplement your NZ Super.

You can set up a regular payment to your bank account according to your budget or make ad hoc withdrawals for unexpected expenses if NZ Super is only enough for your basic needs. Your provider can help you with these decisions, or you can use the tools on the Sorted website.

Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 06 870 3838 or go to peak.net.nz. The information contained in this article is of a general nature and is not personalised. Send your KiwiSaver questions to shelley.hanna@peak.net.nz