Budget 2025: Changes to KiwiSaver
There were big changes announced to KiwiSaver in last month’s budget, and while the changes might not be in many Kiwis’ favour, they are also something that has needed to happen in order for the country to progress.
The simple truth is that with the aging population, the Government eventually won’t have enough money to pay everyone a pension, and this means that Kiwis will need to be able to financially care for themselves in their golden years. These changes have been made to KiwiSaver to help encourage Kiwis to make retirement savings a priority, and we expect to see more and more changes, moving in that direction in the future.
Let’s take a look at what changes were announced….
GOVERNMENT CONTRIBUTION
Probably the biggest announcement was the fact that the Government will be cutting the amount it contributes towards KiwiSaver accounts each year. Right now, if you contribute the minimum of $1,042.86, the Government will contribute $521, a current 50% return.
Come April 2026, this Government contribution will drop to $260.72, and you will still need to contribute the minimum of $1,042.86. This is a 25% return on your money, which is still good, but will see an impact on many Kiwis’ savings accounts.
The Government contribution will also become means-tested, with those earning over $180,000 per year losing the Government contribution altogether.
EMPLOYER CONTRIBUTION
Currently default employer KiwiSaver contribution rates are sitting at 3%. With the new changes, this will rise to 3.5% in April 2026 and then up to 4% in April 2028. The graduated approach provides more time for employers to adjust to the change slowly, rather than a direct 1% rise.
One thing to keep in mind is that you are only eligible to receive the employer contribution if you yourself also contribute. You will need to be contributing the minimum contribution rate in order to get this.
YOUNGER KIWIS
16 and 17 year olds will benefit from the changes, with both ages now being eligible for both the Government and employer contributions, as long as they are meeting the minimum contribution requirements. From the 1st of July 2025, they will receive the Government’s annual contribution and from 1 April 2026, they’ll qualify for employer contributions if working. This is great news, and allows young people to be able to start saving sooner.
WHAT IT MEANS FOR SELF-EMPLOYED KIWIS
Self-employed Kiwis do not receive the employer contribution unless they have set their businesses up with PAYE and therefore receive income via salary or wages from their business. This means the majority of self-employed people are likely making voluntary contributions to their funds. They will be slightly negatively impacted by the reduction in the Government contribution. If this is you, it might be a good idea to talk to your adviser to see how you can make up for this amount with additional repayments, or how the reduction in Government contributions might change your funds current target over time.
NZ VS AUSSIE
It’s likely NZ will follow suit with Australia and its Super scheme, with the Australian Super currently worth $3.2 trillion and KiwiSaver $121 billion. Here are a couple of the current rules for Australian Super that we might see happening here in the near future….
- Contributions to Super are compulsory rather than optional, like in NZ.
- Employers' contributions are much higher than NZ - currently rising to 12% as of July 2025 vs NZ’s 4% come 2028.
- Australian Government Super is means-tested, so those on higher incomes are not eligible to receive it (vs NZ where everyone is eligible despite their income)
THE TAKEAWAY…
There’s no doubt that there will be more and more changes to KiwiSaver to encourage Kiwis to begin saving, and here at Loan Market Queenstown, we welcome this. It’s never been more important to ensure you are on track to hit your retirement savings goals so that you can enjoy your later years with less stress. Planning for this starts now - in your 20’s, 30’s and 40’s!
If you are unsure how much you need to be contributing to live the retirement you desire, or you want to know if your current KiwiSaver fund is offering the best returns, then get in touch for a free analysis. We will compare your current fund with a few options, based on your goals for your fund and your risk tolerance. From there, if you choose to move providers or funds, we can take care of it all for you, all for free!
Book your appointment with us today and let’s chat about how we can help you prepare for a brighter future.