Budget 2025: Big Changes to KiwiSaver

The 2025 New Zealand Budget introduces significant reforms to the KiwiSaver scheme, aiming to enhance long-term savings for retirement and first-home purchases, while ensuring the program's fiscal sustainability. Here's a breakdown of the key changes and their implications.

1. Gradual Increase in Contribution Rates

Starting from 1 April 2026, the default contribution rates for both employees and employers will increase:

• 3.5% from 1 April 2026

• 4% from 1 April 2028

These phased increments from the current 3% rate are designed to help workers and employers plan ahead . Employees who find the increased contributions challenging can temporarily opt down to the current 3% rate and still receive matching contributions from their employers .

2. Extension of Benefits to Younger Members

In a move to encourage early savings habits, the government will extend KiwiSaver benefits to younger individuals:

• Government contributions will be available to 16- and 17-year-olds from 1 July 2025.

• Employer matching contributions will apply to this age group from 1 April 2026.

While automatic enrollment remains at age 18, 16- and 17-year-olds can opt into the scheme and start benefiting from these contributions .

3. Reduction in Government Contribution

To ensure the scheme's sustainability, the annual government contribution will be halved:

• From 50 cents to 25 cents for every dollar contributed by a member.

• The maximum annual government contribution will decrease from $521.43 to $260.72, effective from 1 July 2025 .

Members must still contribute at least $1,042.86 annually to receive the full government contribution .

4. Income Threshold for Government Contributions

From 1 July 2025, individuals earning more than $180,000 annually will no longer be eligible for the government contribution. This change aims to better target government support towards those who need it most .

Implications for KiwiSaver Members

These changes present both opportunities and challenges:

• Enhanced Savings: Increased contribution rates mean that, over time, members will accumulate more substantial retirement savings.

• Early Engagement: Extending benefits to younger members fosters early financial literacy and savings habits.

• Adjusted Expectations: The reduced government contribution and income threshold may require high earners to reassess their retirement planning strategies.

Next Steps

It's crucial for KiwiSaver members to:

• Review Contribution Rates: Assess whether to maintain the default rate or opt down temporarily based on personal financial circumstances.

• Monitor Eligibility: Stay informed about eligibility for government contributions, especially concerning income thresholds.

• Plan Ahead: Consider how these changes align with long-term financial goals, including retirement and homeownership.

For personalised advice and to navigate these changes effectively, consider consulting with a financial advisor.