Free $500+ Government Money for KiwiSaver - Understanding the Value of the Annual KiwiSaver Government Contributions
Understand the importance of contributing $1,042 annually by June 30 every year to your KiwiSaver to unlock the government's $521 match. This guide is aimed at self-employed people, students, young parents taking time off work, and anyone under 65 who might be missing out on this significant benefit.
Updated 11 May 2024
Summary
To help make sense of the issue and explain how it's easy to avoid losing out on free government money, our guide covers:
Summary
- Our guide, the first of its kind in New Zealand, is dedicated to helping anyone not currently contributing to KiwiSaver to consider making a one-off transfer to receive an immediate 50% bonus.
- The government wants to help grow KiwiSaver balances, and we believe there's no better investment than saving around $1,050 every year, transferring it to your KiwiSaver (by June 30) and being matched 50 cents up to $521.43. Best of all, this happens every year you contribute.
- This guide covers the process of applying for $521.43 from the government every year, whether you're self-employed, looking after your children, studying, or anyone else under 65.
- Our view is simple - no one can be forced to contribute to KiwiSaver, but the government offers a generous annual contribution of $521.43 for anyone contributing over $1,042.86.
- However, almost a billion dollars are forfeited every year among those who don't contribute to their KiwiSaver fund. This guide has been published to help make understanding how to contribute easy.
To help make sense of the issue and explain how it's easy to avoid losing out on free government money, our guide covers:
Who is eligible?
To receive the government's annual contribution to your KiwiSaver account, here are the key eligibility requirements:
Don't worry if you're only eligible for part of the KiwiSaver year, from July 1 to June 30 - the government will still grant you a proportional contribution based on how many days you were eligible during the year.
- Age: You need to be between 18 and 64 years old. You may still be eligible if you're older but haven't started withdrawing for retirement.
- Residency: You should primarily reside in New Zealand.
- Contributions: You must actively contribute to your KiwiSaver account throughout the year.
Don't worry if you're only eligible for part of the KiwiSaver year, from July 1 to June 30 - the government will still grant you a proportional contribution based on how many days you were eligible during the year.
MoneyHub Founder Christopher Walsh shares his views on the power of government contributions:
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"As the founder of MoneyHub, I have yet to see a better investment than making (at least) the minimum KiwiSaver contribution to get all the annual government money.
KiwiSaver isn't a trap - it's a crucial wealth-building platform that every eligible New Zealander should be maximising. By contributing just $1,042.86 each year, you unlock a $521.43 government contribution. There are no catches, and the returns are huge. Imagine this: Start contributing at age 18 and keep at it until you retire at 65. With a consistent 7% return rate, your investment grows from $49,000 to nearly $600,000. That's not just a number - it's a life-changing amount that changes your life whether you need a house deposit, move overseas or retire - or all of these things. To anyone thinking KiwiSaver is a trap - think again. It's one of the most straightforward paths to growing your wealth, accessible and beneficial whether you're self-employed, a student, or re-entering the workforce. Don't leave money on the table; make KiwiSaver work for you by contributing at least $1,040 a year and getting free government money. I have recorded the video below to explain everything and focus on how long-term contributions build significant wealth": |
Christopher Walsh
MoneyHub Founder |
Why KiwiSaver is Valuable for Anyone Studying and/or Self-Employed
Whether you're self-employed, a freelancer, or a student, joining or contributing the minimum amount for the maximum government contribution has significant financial advantages.
If you're 18, contributing $1,042.86 over 47 years (until you reach 65) will cost you around $49,000. However, you'll get around $24,500 in government money. And if your KiwiSaver maintains an average 7% after-tax and after-fee return, you'll end up with a balance of $595,280, which shows the power of compounding interest and why KiwiSaver is designed to help every New Zealander become financially secure.
If, for example, you're 35, have a $15,000 balance, but have stopped contributing, 30 years of contributing the minimum amount for the maximum government contribution will earn you end up with over $275,000 by the time you reach 65, assuming the 7% annual net return.
Our video below explains how these figures are calculated:
If you're 18, contributing $1,042.86 over 47 years (until you reach 65) will cost you around $49,000. However, you'll get around $24,500 in government money. And if your KiwiSaver maintains an average 7% after-tax and after-fee return, you'll end up with a balance of $595,280, which shows the power of compounding interest and why KiwiSaver is designed to help every New Zealander become financially secure.
If, for example, you're 35, have a $15,000 balance, but have stopped contributing, 30 years of contributing the minimum amount for the maximum government contribution will earn you end up with over $275,000 by the time you reach 65, assuming the 7% annual net return.
Our video below explains how these figures are calculated:
Contributing to KiwiSaver, even at the minimum level to get the full government contribution every year, has several benefits:
- Building up retirement savings consistently: Your annual contribution of around $1,000 is not insignificant and lets you use KiwiSaver to save systematically and benefit from compounding returns over time.
- Growing a nest egg for if and when you want to buy a first home: After contributing to a KiwiSaver scheme for three years, you can withdraw most of your savings to put towards the purchase. Plus, you might be eligible for a first home grant, which can significantly boost your buying power.
- Reduced financial stress and a government money tailwind: KiwiSaver money is yours to put into a fund of your choice, which means your money could grow more significantly than it would in a regular savings account. Add in the $521 a year in government money when you contribute over $1,042, and it's a fast way to establish financial security and reduce stress about future finances.
Testimonials and Success Stories from New Zealanders Consistently Earning the $500+ Government Contribution
Whatever your needs, contributing to KiwiSaver to get the $500+ annual government top-up is always worth the effort. Four New Zealanders share stories as to why:
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Ben's Journey: Committing Early Pays Off"At 25, I've been contributing the minimum to KiwiSaver for seven years, consistently receiving the maximum government contribution. Even with these small amounts, my balance is already impressive, thanks to compounded growth. It's reassuring to see my first home fund building up effortlessly." - Ben, Wellington
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Emily's Experience: Steady Through Up and Down Markets"I started my KiwiSaver at 23, right before the Global Financial Crisis hit. Despite the market's ups and downs, I've kept up with my contributions even when the markets (and my fund) went down for some time. Now at 40, I not only have a robust nest egg but also peace of mind knowing that my retirement is secure." - Emily, Auckland
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​A Freelancer's Freedom: Lisa's Path to Financial Growth"Being a freelancer, my income isn't always predictable. Initially, I was worried about not being able to contribute consistently. However, I've seen my KiwiSaver balance grow significantly by ensuring I meet the minimum $1,042.86 annual contribution. This flexible approach has allowed me to benefit from KiwiSaver without the stress of monthly commitments. Now, I'm on track for a comfortable retirement." - Lisa, Graphic Designer, Christchurch
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First-Time Home Buyers: Mark and Ana's Dream Come TrueWe always thought saving enough for a house deposit would take forever. However, after contributing to our KiwiSaver funds for six years, we were able to withdraw our savings combined with the HomeStart grant to purchase our first home. Our KiwiSaver funds covered a substantial part of the deposit, making what seemed impossible a reality. This has truly changed our lives and given us a great start." - Mark and Ana, Hamilton
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Frequently Asked Questions
Our list below covers why contributing even the minimum amount to get the full government contribution is valuable.
What is the size of the opportunity lost by those not contributing more than $1,042.86 annually?
We estimate the amount to be around $865 million annually. This figure derives from New Zealand's working-age population, approximately 4.26 million people. With 39% of KiwiSaver members not contributing, this translates to about 1.66 million non-contributing members. If each of these individuals received the full annual government contribution of $521.43, the total would be approximately $865 million each year.
I'm self-employed. Can I contribute around $1,043 to KiwiSaver every year and receive the $521?
Yes - as a self-employed individual, you can contribute voluntarily to your KiwiSaver account. Contributing at least $1,042.86 annually will qualify for the maximum government contribution of $521.43. This is a straightforward way to grow your savings, ensuring you leverage the government's 50% match on your contributions up to this limit.
​Is the $521 taxed? Do I pay fees?
The $521.43 government contribution to your KiwiSaver is not taxed upon entry into your account. However, like all funds within KiwiSaver, the returns generated from these contributions are subject to applicable taxes and fees based on your chosen fund type. Your fees are typically a percentage of your KiwiSaver balance and can vary depending on your fund provider and the specific fund in which your money is invested.
How often do I need to contribute to get the government's $521.43?
You don't need to contribute monthly or weekly; you just need to ensure that you have contributed at least $1,042.86 during the KiwiSaver year, which runs from July 1 to June 30. You can make this as a lump sum or through irregular contributions throughout the year as long as the total reaches the required amount by June 30.
What if I can't afford to contribute $1,042.86 this year?
If contributing the full $1,042.86 is difficult this year, remember that the government will still match any amount you can contribute at 50 cents on the dollar up to the maximum contribution of $521.43. This means a $500 contribution will be matched with $250, and the match will continue to grow due to compound interest.
Can I withdraw all the government contributions if I buy a house or move overseas?
Yes - but there are some limits. For a first home, you can withdraw your contributions, your employer's contributions, and any returns on investment, but you must leave a balance of $1,000 per IRD guidance.
If you are moving to Australia, you can transfer your KiwiSaver balance to an Australian superannuation fund. This includes all government contributions.
If you move permanently to a country other than Australia, you can withdraw your KiwiSaver funds after one year of living abroad. This includes your contributions, your employer's contributions, and returns on investment, but it excludes government contributions per IRD guidance.
If you are moving to Australia, you can transfer your KiwiSaver balance to an Australian superannuation fund. This includes all government contributions.
If you move permanently to a country other than Australia, you can withdraw your KiwiSaver funds after one year of living abroad. This includes your contributions, your employer's contributions, and returns on investment, but it excludes government contributions per IRD guidance.
Does contributing to KiwiSaver affect my eligibility for other government benefits?
Contributions to KiwiSaver are considered voluntary savings, so they do not impact your eligibility for government benefits. However, the money saved in KiwiSaver might affect asset testing if you apply for a means-tested benefit.
The Next Steps to Take (and Not Miss Out on Government Money)
For the Self-Employed, Stay-at-Home Parents, KiwiSaver members not contributing, Students (and anyone who can contribute to KiwiSaver):
Finally, Many New Zealanders Don't Contribute to Kiwisaver - Please Don't Be One of Them:
- Start Now: No matter your income level, starting your KiwiSaver contribution today means you're building toward a more secure future. Every little contribution counts and gets boosted by the government match.
- Set Annual Reminders: Mark your calendar for contributions to ensure you maximise the government's annual contribution. Consider setting up automatic transfers to make the process seamless.
- Take the First Step: Our guide to top-performing KiwiSaver funds has more details. Remember, it's never too late to contribute towards your future; every contribution brings you closer to financial security.
Finally, Many New Zealanders Don't Contribute to Kiwisaver - Please Don't Be One of Them:
- Although KiwiSaver boasts over three million members, covering 96% of New Zealand's working-age population, a significant 39% of these members are not actively contributing to their accounts per 2023 government research.
- Some New Zealanders do not trust KiwiSaver for many reasons, mainly because of the limitations on withdrawing money, the cost-of-living crisis, and/or the belief that individuals are better with their money than a fund manager. But government money comes without a catch. As the sample calculations and testimonials show above, there is a high return on making regular contributions if only to maximise the government money.
Related KiwiSaver Guides
- Top Performing KiwiSaver Funds
- KiwiSaver HomeStart Guide - get a grant of up to $20,000 and access to your KiwiSaver fund for your first house or apartment deposit
- KiwiSaver First Home Withdrawal Guide - if you want to use your KiwiSaver balance for a house deposit, our guide explains everything you need to know
- Your KiwiSaver Contributions - You can choose how much to contribute. Find out what happens when you go on leave, receive a benefit or entitlement, or have a tax debt
- Voluntary Contributions - make voluntary contributions (or lump sum payments) at any time, either directly to your KiwiSaver provider or through Inland Revenue
- KiwiSaver and Tax - KiwiSaver contributions are deducted from your before-tax pay, and our guide explains everything you need to know.
- How to check your KiwiSaver contributions - Keeping track of your KiwiSaver contributions is easy with 'My KiwiSaver'
- KiwiSaver Withdrawal - If you joined KiwiSaver on or after 1 July 2019, you can withdraw your savings when you qualify for NZ Super (currently 65)
- KiwiSaver Providers - You can choose which scheme to join, even if you're provisionally allocated to an employer-chosen/default scheme
- Opting out of KiwiSaver - If you're a new employee who's been automatically enrolled, you can choose to opt out of KiwiSaver
- Calculating your PIR - our guide covers everything you need to know to making sure you're paying the correct tax on investment fund earnings.
- KiwiSaver Calculator - our retirement calculator considers KiwiSaver contributions, how much you earn right now, how much you plan to spend during retirement, and how old you are, among other factors.
