Who Doesn't Love Free Money?

Would you turn down the opportunity to get a guaranteed 50% return on an investment? Many people are simply by missing out on the full government contribution to their KiwiSaver. How the government contributions work is one of the most common misconceptions we come across. Most commonly, people mistakenly think they need to reach a threshold to be eligible for the ‘Free $500 from the government’. That is to say they think they have to put in a certain amount in order to qualify for the $500.00 (actually $521.43c). This is not actually the case. There is no threshold contribution to make to be eligible for a government contribution.

The government contributions work on the basis that for every dollar you contribute (up to $1042.86) to your KiwiSaver, the government will match it with a 50 cent contribution (their maximum contribution being $521.43). That’s a 50% return on every dollar you contribute. So even if you only contribute $300.00, you will receive a government contribution of 50% of your contribution (in this example $150.00).

For anyone who earns a little over $35,500 and contributing at 3%, the government contribution will pretty much take care of itself. That is to say that your employee contributions to your KiwiSaver will be enough to ensure you receive the full government contribution ($521.43c).

However, every year thousands of individuals miss out simply by not making any or enough contributions to receive a part or the full government contribution. This is especially important to people who earn less than $35,500 a year, are self-employed (and take drawings) or are not currently working.

For those who earn less than $35,500 a year, there are a couple of ways you can ensure you receive the full contribution from the government.

Firstly, you could increase your contribution rate to ensure you are contributing at least $1042.86 per year. The amount you will need to increase it to will depend on your current annual pay and how the additional contributions fit into your budget. Once you’ve worked out how much additional contributions you need to make to ensure you receive more of or the full government contribution, tell your employer you want to change your contribution rate. They will get you to fill in a KS2 form to authorise the change.

Alternatively, you can make a lump sum contribution to your KiwiSaver to ‘top up’ to the $1042.86 level to receive the full government contribution.

Many self-employed people join KiwiSaver with the sole intention of receiving the full government contributions. They enrol in KiwiSaver and set up a regular payment to meet the equivalent of $1042.86 per year to receive the full government contribution.

Similarly, if you are not working or are a beneficiary, you are still eligible to receive the government contribution in the same way a self-employed person does.

Bear in mind also that the eligibility/payment cycle is based on the ‘KiwiSaver year’, which runs from the 1st of July to the 30th June annually. So you have until the 30th June to make a payment that tops your KiwiSaver contributions up to $1042.86 per KiwiSaver year.

If you would like to know more about how KiwiSaver works and how you can review it for

yourself, feel free to message us to book a 100% free 30 minute KiwiSaver Tutorial.