A Guide to the KiwiSaver Annual Government Contributions

The Government will soon be giving all KiwiSaver members a free top-up of $521.43 if you have contributed $1,042.86* between 1 July 2019 and 30 June 2020 towards a KiwiSaver Scheme.

The Rules for KiwiSaver Government Contributions

This Government contribution was formerly known as Member Tax Credit. Each year between 1 July and 30 June, if you contribute $1,042.86, the Government will put in $521.43. This means they will match you 50c for every dollar you contribute up to that amount.

All KiwiSaver aged between 18 and 65 (and mainly living in New Zealand) are eligible, whether you are working or not.

*If you have just joined KiwiSaver (any scheme) within the year to 30 June 2020, the Government will contribute a pro-rata amount based on the number of days you have been in KiwiSaver. If you turn 18 partway through the year to 30 June 2020, you are eligible for the number of days you are 18.

If you are over 65 you may still be eligible if you joined before 65 and have not been in KiwiSaver for five years.  You must also have joined KiwiSaver before 1 July 2019 and not made any retirement withdrawals.

How Do You Know You Will Get the KiwiSaver Government Contributions?

To check how much you have contributed through your wages/salary this year to qualify for the full Government contribution, login to myIR.  If you have not used this service before, you will need to register.  Once you are logged in, select KiwiSaver from accounts and you can view your deductions from salary and wages under Contribution Summary.

If you have not contributed enough, you can make a lump sum payment to get you up to that amount. This is worth looking into, especially if there is only a small shortfall. It might only be $10 or $20 to get you up to the minimum requirement.

When are the tax credits paid?

You should receive a member tax credit in KiwiSaver account around July or August every year. This means that you need to make sure you have contributed your $1,043 by the end of June if you are wanting to qualify for the full member tax credit for that year.

What Kind of Investment Strategy is Right for You?

There are three main types of investment strategies in KiwiSaver. You can pick low, medium, or high risk. A financial adviser can help you decide what is best for you, but as a rule of thumb, low risk means low but steady returns, high risk offers the opportunity for big gains- and losses. The medium risk offers a blend of low and higher risk investments, offering a mid-point.

At this point, you may also want to think about the ethics of your investments. Depending on who your investment provider is, there can be a range of shares they invest in. Oil and fossil fuels, weapon trading, pornography, tobacco, alcohol, and gambling are all common investments, often hidden in ethical-sounding wrappers. Four of the nine default providers still invest in companies that make nuclear weapons, cluster bombs, and mines.

Choose a KiwiSaver Provider

It is so important to choose the right scheme provider. How do you choose the right one? If you do not choose one, IRD will allocate you to a default provider, but it is simple enough to change it later although the provider may charge you a fee for changing.

You can conduct research into each provider and make decisions based upon their past performance of their funds and the types of investments they make. If you are not confident and do not really know what you are looking for, then give Sam Kodi a call.

Sam Kodi will be able to help you join KiwiSaver, select the right fund and determine the best level of contributions to reach your goals. He will also be able to help you assess the performance of your investment and assist you to make changes if necessary.