How to get free money from KiwiSaver with Government & Employer Contributions.

There are two ways in which you can get free money for participating in KiwiSaver, both with their unique benefits and eligibility criteria.

Employer matched contributions

If you are eligible for KiwiSaver, and work as an ‘employee’ for an ‘employer’, then you are entitled to employer matched contributions. By law, it is compulsory for employers to match staff’s contributions up to a minimum of 3%. This contribution is additional to your salary or wages, so just by being a part of KiwiSaver and putting away 3% (or more) towards your scheme of choice, you are effectively giving yourself a 3% pay rise!

A common question people have is ‘I contribute 3% towards my KiwiSaver, and my employer matches that, why are my employers contributions less than my own?’ The answer is that employee contributions are ‘gross’ of tax, whereas employer contributions are ‘net’ of tax.

It’s important to note that some employers match their staff’s contributions by more than 3%, so make sure you talk to your HR team to ensure that you are getting all the free money that’s on offer.

Government contributions

The Government is pretty keen on KiwiSaver, to the point where they incentivise members by matching their contributions $0.50 to the $1.00, up to a maximum of $521.43 each year. There are a few caveats to this, however most Kiwi’s will be eligible to receive their free money.

• You must be between the ages of 18 and 64.

• You must contribute $1,042.86 to receive the full Government contribution ($521.43), if you contribute less than that, you will be eligible to $0.50 on the $1.00 (i.e. if you contribute $480.00 in a year, you will be eligible to receive $240.00, if you contribute $2,200.00 in a year, you will be eligible to receive $521.43).

• Only your personal contributions count towards contributions for the benefit, therefore any employer contributions or Government contributions won’t assist you (i.e. if you personally contribute $850.00, and your employer contributes $700.00, you will only be eligible to receive $425.00).

• You must be a member for a full KiwiSaver year to receive the full Government contribution. The KiwiSaver year is from 1 July to 30 June. If you join KiwiSaver during the year, you will only be eligible for a pro-rated Government contribution (i.e. if you joined KiwiSaver on 1 October 2019, and contributed $1,500, you’d be eligible to receive $391.07 [$521.43 * (9/12]) in June 2020.

• You must be living mainly in New Zealand

How does this look over time?

These Government contributions add up, especially when you are generating returns. To see this in action, let’s see how much a single Government contribution of $521.43, invested by a 25 year old at 7.5% (after-tax) year on year, will be when they turn 65.

His free contribution ends up totalling $9,408.81… definitely something not to be missed. If you want to know if you’re KiwiSaver fund is both being maximised for returns and suitable for your personal situation, follow the link below to our online fact find. The fact find only takes 5 minutes to complete, and once you have finished we will provide you with a free no-obligation KiwiSaver recommendation.

Compound Wealth are based in Mount Maunganui, Tauranga and offer KiwiSaver, Investment & Retirement Financial Advice to clients all over New Zealand.