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KiwiSavers miss out on $270 million – employers may be to blame

Media release

June 6, 2018

KiwiSaver members miss out on $270 million

– employers may be partly to blame


More than half a million KiwiSaver members left $270 million of government contributions unclaimed last year, and employers may be partly to blame.

David Boyle, Education Manager at the Commission for Financial Capability, says some employers may not be fulfilling their legal obligation to pay the required 3% employer contribution to KiwiSaver on top of their employees’ wages.

A CFFC survey in May of 500 companies showed only 55% of employers paid the 3% on top of wages, 10% paid it out of their employees’ salaries, 20% were ‘not sure’, 10% said ‘it varied’ and 5% offered other pension schemes. Boyle says in many cases employers bundle the 3% into an employee’s wages, and the employee must choose whether to have it sent to their KiwiSaver account. By law, employers can only include KiwiSaver contributions in salary packages if they have negotiated this with the employee “in good faith”.

“If you have two staff on the same wage, and one has the employer’s 3% KiwiSaver contribution paid on top and one has it included in their salary, the worker with it included has essentially taken a 3% cut in their take-home pay. It’s not surprising if a number of these employees do not contribute to KiwiSaver.”

If a KiwiSaver member does not contribute at least $1042 to their account by June 30 each year, they are not eligible for the full Government contribution of $521. Called the Member Tax Credit, Boyle says the $521 is “practically free money” to encourage KiwiSaver members to contribute at least $20 a week.

“That’s less than the price of a couple of beers, or four lattes per week.”

But by the end of June 2017, more than 520,000 KiwiSaver members had not contributed anything to their accounts, missing out on $270 million in Member Tax Credit contributions that members could have put toward buying a first house, or their retirement.

Boyle concedes there are a number of reasons why members don’t contribute – their income may be simply too low to spare anything for KiwiSaver, they may be priortising debt payment, they may be students or not currently in paid work. Contract workers often overlook negotiation of KiwiSaver contributions as part of their contracts, so KiwiSaver “falls off their radar”.

“But I think employers need to be more aware of their obligations to their staff. Legislation requires them to pay their 3% on top of wages, and if they want to negotiate to include it in an employee’s package, then in good faith they should increase that person’s salary by 3%. If an employee thinks their employer is not meeting their legal obligations, they can complain anonymously to IRD.”

Boyle also thinks responsible employers should revisit KiwiSaver with their staff each July to make sure they are contributing at least $20 a week so they are eligible for the Member Tax Credit come June 30 the following year.

“It’s money the Government is happy to give us to encourage us to save – let’s not leave it sitting on the table.”

Check your KiwiSaver statements or contact your provider to see whether you have contributed the minimum $1042 between June 30 2017 and June 30 this year to be eligible to receive the full $521 Member Tax Credit. If you have, you don’t need to do anything more. The $521 will appear in your KiwiSaver account in July.


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