Member Tax Credits

More than 60,000 Mercer KiwiSaver scheme customers shared in a $26 million retirement savings top-up in 2016, courtesy of the NZ Government’s member tax credit scheme.

That’s the good news. On the not-so-good side, more than $21 million of potential credits went begging as eligible customers failed to take full advantage of the scheme.

About 30,000 Mercer customers made no contributions to the KiwiSaver account, leaving all available credits on the table. A further 23,000 received some money from the Government, but not as much as they might have.

On average, customers received $277.

Younger customers were most likely to forego the free cash on offer – those aged 18-39 let a combined $12.5 million go begging. Most customers aged 60+ were savvier, contributing enough to get just about every dollar owing to them; about 70 per cent got the maximum tax credit. 

David Boyle, General Manager of Investor Education at the Commission for Financial Capability, says many KiwiSaver members missed out on tax credits because they don’t understand the rules.

“People think they have to put the full $1,042 in each year before they get the matching $521 member tax credit from the Government,” Boyle says. “But the reality is that for every dollar you put in, the Government adds 50 cents; up to $521.”

Mercer’s Sarah Whitelock says every little bit helps.

“One of our customers topped up their contribution by 50 cents, and they got 25 cents from the Government in return,” spokesperson said. “Now, that’s not going to add a lot to their final balance but the point is, no matter how small your contribution, the Government will contribute its share.” 

Of course, getting the full $521 on offer will make the biggest difference to your retirement savings and to get that you will need to contribute $1,042 during the financial year.

As a single lump sum, that might sound a little steep, but when you put it in perspective it’s actually quite achievable; just $20 a week for 52 weeks – about the cost of a daily coffee.

Another useful point about member tax credits; they have nothing to do with tax. They’re simply a cash payment from the Government, calculated annually and paid into your KiwiSaver account.

Top up your account today and make the most of your member tax credits in 2016/17. You can pay straight into your KiwiSaver account.

Simply find Mercer KiwiSaver scheme on your online banking and follow the instructions.

Call us on 0508 637 237 to discuss your contribution strategy.