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KiwiSaver members don't understand MTC

New research from Inland Revenue shows many KiwiSaver members don't understand how the tax credit works, or what it is.

Wednesday, August 30th 2017, 6:00AM

The Commission for Financial Capability is calling for action from providers to ensure that more people in KiwiSaver receive one of its main benefits: the $521 member tax credit (MTC) paid to members by the government.

The research found that almost half of KiwiSaver members had not heard of the term “member tax credit”. When it was explained to them, 25% were still none the wiser.

People were even unclear about their own funds: Of those who knew about MTCs, some thought they hadn’t received any money when they had. Some thought they had been paid the full amount of $521 when they hadn’t.

The Commission’s education manager David Boyle said: “There’s clearly a lot of confusion, which is frustrating given that KiwiSaver has been with us for 10 years. There’s been plenty of time to address this growing issue. 

“Some KiwiSaver providers have told us that the barrier is affordability. Inland Revenue has surveyed a broad range of members to improve understanding about what was stopping them getting some or all of their MTC and to test the affordability theory.

“The research shows that while it was part of the issue, there were other reasons why people missed out. Many said they would have saved in KiwiSaver if they had known about the MTC and they expected their providers to communicate more clearly.”

Last year 1.1 million members missed out on the full MTC. Of that number 580,000 received nothing at all which means they didn't save anything.

Almost 40% of people who didn’t get the full MTC said they weren’t on a salary or wage and simply forgot to set up a payment.

Boyle said: “It’s disappointing that Kiwis are missing out on money which could help them in the future when they decide to stop work finally.

“It’s the best-known return anyone is going to get on their savings. Simply put, those who are eligible are getting a 50% return on every dollar up to $1,043 a year. 

“But once that year goes by, you can’t go back and claim it later. That's why it is so important to act now and make sure you don't miss out next year. 

“We had always suspected that awareness was an issue. This research confirms that’s the case and we would encourage providers to do more to get the message out about MTCs.

“It’s worth acknowledging that some are making it a greater priority than others. More action in this area is a win/win for both providers and members.

“At the Commission we will be looking at our own messaging on this topic, and continue to explore what we can do to help reduce this lost opportunity.”

The research came from a survey of 1800 people by Inland Revenue.

Tags: KiwiSaver

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