How to get $521 from the government

It's coming up to that time of year again - when you get a chance to pocket (or not) $521 from the government.

Here's what you need to know to get your full entitlement.

What's available?

There is a "member tax credit", or government contribution, available to all KiwiSaver members who are aged between 18 and 65.

It is a maximum $521, paid after the end of the KiwiSaver financial year on 30 June.

The money goes directly into your KiwiSaver account and is paid at a rate of 50c per $1 contributed, up to a maximum contribution of $1042.86.

If you contribute less than $1042 in the year to the end of June, you'll still get some of the government credit, but to get the full $521, you need to contribute the entire amount.

In the year to June 2023, there was $970.2 million paid to KiwiSaver providers as government contributions.

How do you get it?

As long as you are over 18 and not yet old enough for the pension, you don't have to do anything except contribute to your KiwiSaver fund to receive the money. Your provider makes the claim for the money on your behalf.

To be counted towards the $1042, your contribution can be made as a one-off lump sum, from contributions through your pay, or as voluntary payments made directly to your provider through the year.

If you've been earning at least $35,000 a year and contributing 3 percent of your income to KiwiSaver, you should have contributed enough to get to the target. But if you're not - maybe you're self-employed - you'll need to have put in the equivalent of just over $20 a week.

Now is a good time to check whether you're on track because you still have time to make additional contributions if not.

Are people missing out?

To put it bluntly, yes.

There are 3.25 million KiwiSaver members. In the 2023 year, just 1.647 million received the full government contribution. Another 587,000 received a partial payment.

There are about 200,000 children in KiwiSaver who would not be eligible but that still leaves hundreds of thousands of people leaving money on the proverbial table.

Does it really matter, in the wider retirement savings picture?

Westpac said people might be surprised at the difference the extra $521 would make to their balances over an investing lifetime.

It said, based on its calculations, a 25-year-old who invested in a growth fund at an average projected return of 4.5 percent per year and received the full government contribution every year would have an extra $55,808 at age 65, thanks to the government contribution and associated investment returns.

A 35-year-old in a balanced fund at an average return of 3.5 percent a year stood to pocket an extra $26,917 by age 65, while a 45-year-old in a conservative fund at 2.5 percent would have an extra $13,319, it said.

"These figures show that a relatively small amount invested in your KiwiSaver a year can make a big difference to your retirement years," said Nigel Jackson, chief executive of BT Funds Management, the Westpac KiwiSaver scheme provider.

"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 $1,042.86 cap is a handy investment in your future financial well-being.

"If you don't have the money to contribute this month, make a plan to ensure you qualify for the full amount in 2025.

"One tip we've shared with customers is to consider setting up a weekly $24 automatic payment into their Westpac KiwiSaver scheme account. This will put them on track to receive the full amount next year."

He said women, people aged under 40, and people in a default fund rather than having made an active choice, were more likely to be missing out.

"Regardless of your age, gender, or stage in life, It's always a good time to be thinking about saving for retirement.

"To younger New Zealanders, that might seem like a long way away. But these figures show they stand to benefit the most by contributing regularly, because a little amount could make a big difference over decades."