Key Points:

More than half of the adults who are in KiwiSaver put nothing or less than $1043 of their own money into their accounts in the last financial year - a stark contrast to claims the scheme is a rip-roaring success. Figures from the Inland Revenue department show 579,832 adults did not receive any government subsidy in the year to June 30 meaning they put no money into their account. A further 609,141 put in some money but not enough to gain the full subsidy meaning they contributed less than $1043 over the year. KiwiSaver members over the age of 18 are able to get up to $521.43 from the government every year through a member tax credit. For every dollar a person puts in the government puts in 50c up to the maximum. But more than $300 million is being left on the table every year by people who either contribute nothing or just a small amount of money. Just 45 per cent of eligible members got the full tax credit last year or 985,780 of the 2,174,753 who could get it. The annual contribution can add more than $20,000 to a person's retirement savings over a 40 year saving time horizon. David Boyle, group manager of investor education at the Commission for Financial Capability - the government's money education arm - said the commission had put a lot of effort into raising awareness around the member tax credit specifically targeting those who were most likely to be in the group of non-contributors - students, contractors, non-workers, beneficiaries and the self-employed. "We are getting a lot of hits online, but what we don't know is whether people are doing anything about it." Boyle said the IRD figures suggested the scheme was failing to capture a growing part of the working and non-working group of New Zealanders. "I'm really frustrated and disappointed. I was really hoping the numbers [of non-contributors] would go down this year." Instead they have risen by 6,600 people although the percentage of eligible people not contributing has fallen from 28 per cent to 26 per cent. Boyle said the commission was not blind to the affordability issue. "We know there are a lot of New Zealanders out there on low incomes or benefits - we are not blind to that. "But I can't believe out of all those 580,000 people a percentage of them can't afford to put in $1 or $5 a week. There must be some that could or should be doing this." Part of the issue was a misconception that you had to put in the full $1043 to get the subsidy when every dollar contribution gave a person 50c from the government up to the cap. Boyle said he worried that if the numbers did not pick up the government would see it as a reason to review the tax credit. Binu Paul, managing director of Savvy Kiwi - a KiwiSaver research site - said the number of people not contributing was "massive" and he blamed a lack of engagement by savers. "Awareness [of KiwiSaver] is high. Engagement is what is lacking."

Because there is no instant gratification the engagement becomes extremely low - a lot of people exist for the here and now and retirement savings don't work like that.
Binu Paul, Savvy Kiwi managing director
Paul said many people had not factored in what that $521 meant or what the extra $20,000 could do for them at retirement. "Because there is no instant gratification the engagement becomes extremely low - a lot of people exist for the here and now and retirement savings don't work like that." Paul said compulsion would go a long way towards fixing the problem. The government has talked about soft compulsion in the past where all working adults would be automatically enrolled in KiwiSaver but it has delayed the move due to the cost associated with it. Even then savers would be able to opt out of contributing by going on a contribution holiday. But Boyle said he did not believe compulsion was the answer. He said he believed the solution lay in making a better connection to people and helping them to understand what they were missing out on. How to get your $521: • Ensure you are putting in a least $20 a week to your KiwiSaver account • If you earn under $35k, increase your contribution rate from 3 to 4 per cent • Check how much you have contributed with your provider and do a one off top up before June 30 to reach $1043 to get the full $521 • Even if you can't afford to put in $1043 it is worth putting in whatever you can because every dollar you contribute is matched by 50c from the government up to the maximum $521