$55,000 back pocket hole: Cut-off nearing for Government KiwiSaver contribution

The cut-off to receive the Government's KiwiSaver contribution is nearing. Photo / 123RF

KiwiSaver members could be missing out on up to $55,808 in additional savings at retirement by not making minimum contributions, according to a Westpac NZ analysis.

For every $1 a member pays into KiwiSaver up to $1042.86 each year, the Government matches 50c - or $521.43 annually.

Based on assumed returns from the Westpac Retirement Calculator, a 25-year-old who invests in a growth fund at an average projected return of 4.50 per cent per annum and receives the full Government contribution every year would have an extra $55,808 at age 65.

Meanwhile, a 35-year-old in a balanced fund at an average return of 3.50 per cent could pocket an extra $26,917 by age 65, while a 45-year-old in a conservative fund at 2.50 per cent would have an extra $13,319.

The annual cut-off to receive those Government contributions is June 30.

Nigel Jackson, chief executive of BT Funds Management (NZ) - the Westpac KiwiSaver Scheme provider - said members can make voluntary lump sum contributions into their KiwiSaver any time to ensure they receive the full Government contribution.

“These figures show that a relatively small amount invested in your KiwiSaver a year can make a big difference to your retirement years,” Jackson said.

“We know many New Zealanders are doing it tough at the moment, so saving for retirement probably isn’t top of mind. But every dollar you can put in up to that $1042.86 cap is a handy investment in your future financial wellbeing.”

Westpac said it had sent targeted communications to around 113,000 customers, outlining their current contribution level and what they need to do to get back on track.

“Our 2023 data shows that women, people aged under 40, and people who are in our default fund rather than actively choosing a fund were more likely than other groups to miss out on the Government contribution,” Jackson said.

“Regardless of your age, gender or stage in life, it’s always a good time to be thinking about saving for retirement.

“A little amount could make a big difference over decades.”

Recent figures show more Kiwis are tapping into their KiwiSaver to withdraw funds due to financial hardship.

In the year to June 30, 2023, financial hardship withdrawals amounted to more than $172.9 million, up from $104.4m in the 12 months prior, according to Inland Revenue figures.

That figure was surpassed through the first nine months of the current financial year (July 2023-March 2024), with more than $209.5m already withdrawn.

Already, 26,580 KiwiSaver members had made financial hardship withdrawals as of March 2024 - up from the 20,601 in the financial year to June 2023.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.