Time running out for nest egg ‘free money’
KiwiSavers have just over a week to make sure they get their full $521.43 government KiwiSaver contribution, but ASB says hundreds of thousands of people look set to miss out.
KiwiSavers can get a maximum government contribution each by saving $1042.86 into their accounts in the year to the end of June, earning 50 cents for every $1 saved.
But Adam Boyd, ASB’s head of wealth and insurance, said almost half the bank’s nearly 500,000 KiwiSaver members had not put in enough to get their full government contribution and needed to make a voluntary deposit in the next week.
‘‘For those that can, ensuring they maximise this benefit should be a priority,’’ Boyd said.
‘‘Government contributions are there to help boost members’ KiwiSaver balances and encourage them to save, but essentially it’s free money for those who are eligible.
‘‘A 50 per cent return is significant, and a lot of people are not taking advantage of this.’’
In all, KiwiSavers with ASB who
hadn’t yet saved enough were on track to miss out on a combined $90 million in government contributions. The trend was likely to be similar across other KiwiSaver providers, which means savers collectively could miss out on hundreds of millions of dollars from the government, Boyd said.
Over a lifetime, missing out on government contributions could add up to retirement nest eggs that were almost $25,000 smaller than they otherwise would be, Boyd said.
Tom Hartmann, editor of the government financial information website Sorted, said every KiwiSaver member should check to see whether they would get their full contribution.
But not everyone could or should make additional voluntary contributions. For many lower-income families, there could be more pressing financial priorities, such as saving a $1000 ‘‘emergency fund’’ to help cope with unexpected bills, he said.
‘‘Ideally, we would like people to do both these things [save an emergency fund and get the full government KiwiSaver contribution] at the same time,’’ Boyd said.
‘‘If there’s a choice between those two things, I would suggest the emergency fund would be the priority. We know for many people, making large regular contributions can be hard, but every bit helps.’’
Savers who did not know how they were tracking, or were unsure how to make voluntary KiwiSaver contributions should contact their KiwiSaver provider, he said.
Contributions should be made at least three working days ahead of the June 30 deadline, he said.
The government contributions have been criticised as unfair and sexist. Social justice campaigner Susan St John last year said the contribution favoured people who spent more of their lives working and people on higher incomes.
‘‘When women aren’t in the workforce for 40 years, why aren’t they entitled to work until after 65 and still get the subsidies, for example?’’ St John said.
‘‘For those that can, ensuring they maximise this benefit should be a priority . . . A 50 per cent return is significant, and a lot of people are not taking advantage of this.’’ Adam Boyd
ASB head of wealth and insurance