Despite inflation-constrained budgets, more KiwiSavers are saving enough to get the full $521 government contribution
Despite the rising cost of living, so far people have not reduced their contributions to KiwiSaver.
Despite high inflation and tough times, a higher proportion of KiwiSavers could get their full government contribution this year, compared to last year, according to ASB data.
Hamish Davidson, head of KiwiSaver distribution at ASB, said 53% of his KiwiSaver members were on track to get the full government contribution of $521.43, slightly ahead of last year.
Davidson said this was likely due to people saving more in KiwiSaver in the second half of last year before inflation spiked, as well as an education campaign by the bank. .
Savers must contribute at least $1,042.86 from salaries and voluntary contributions in the 12 months to the end of June to qualify for the full government grant.
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Those who contribute less still receive 50 cents for every dollar contributed.
Davidson said KiwiSaver dues have held up well despite increases in the cost of living, including rising mortgage rates.
Inland Revenue data shows that fewer KiwiSaver members were on dues suspension than in March of the previous year, and the dollar amounts saved in KiwiSaver were higher.
International Women’s Day, March 8, has sparked greater soul-searching about the pay gap.
Voluntary contributions are used by many savers to supplement their savings to get the full government incentive, with 125,000 ASB KiwiSaver members making voluntary contributions in June after being invited.
“We know the cost of living is a real concern for Kiwis and saving for retirement may not be a priority, or it may not be a reality for some people, but we all encourage those who can afford to make additional contributions to make in order to ensure they receive this benefit,” Davidson said.
Davidson said his data showed about 47% of savers in his programs would earn no less than the total government contribution of $521.
That would be about $80 million in missed money.
ASB is the second-largest KiwiSaver with $14 billion saved in its funds at the end of March, according to data from fund research firm Morningstar.
Davidson said this indicated New Zealanders would collectively miss out on hundreds of millions of dollars this year.
“In the long term, $521 more per year can generate significant savings. For a working New Zealander aged 18 to 65, receiving the maximum free government contribution each year could add nearly $25,000 extra to their retirement fund,” he said.
Other big KiwiSaver providers like Kiwi Wealth, ANZ and Westpac run similar campaigns every year. Kiwi Wealth shows savers how much government contribution they’ve earned when they log in to check their balances.
There have been whispers of dissatisfaction with the fairness of government contributions, which are more easily earned by those with higher incomes, and are earned by more men than women.
In its 2019 retirement income policy review, Te Ara Ahunga Ora Pensions Commission called for the introduction of “care credits”, with the government paying contributions to people raising children or caring for members family members, which would make KiwiSaver fairer for women.
He also said that many people see government contributions as an “entitlement” and that the government should consider paying them only on the basis of additional voluntary contributions, which would encourage people to save more.