The government is introducing key changes to KiwiSaver designed to enhance the schemes long-term sustainability and better support New Zealanders in building savings for retirement or a first home. These updates will impact contribution rates for employers, employees, and the government, while also extending eligibility to include younger workers.
What’s Happening to the Contribution Rates?
Currently, both employers and employees contribute a default rate of 3% of the employee’s salary or wages to KiwiSaver. This rate is set to increase in two stages – rising to 3.5% in April 2026, and then to 4% in April 2028.
To ease everyone into the process, employees have the option to temporarily “opt down” to the current 3% rate after the first increase, and employers will match that lower rate during that time.
While the intention behind these changes is to strengthen Aotearoa’s overall retirement savings, concerns have been raised about the potential impact on wage growth, as employers face increased costs to meet the higher contribution rates. For many Kiwis, boosting KiwiSaver contributions may not be a priority right now, they need more take home pay to navigate the ongoing cost of living crisis.
Regardless, the changes are expected to enhance financial security in retirement, encourage stronger saving habits, and help young people get into their first homes sooner.
What’s Changing with the Government’s Contribution?
From 1 July 2025, the government’s annual contribution will be cut in half. Currently, the government contributes 50 cents for every dollar you put in (up to $521.43 per year). This is set to drop in the coming year to 25 cents per dollar, with a new maximum of $260.72 per year.
You will still need to contribute at least $1,042.86 each year to your KiwiSaver to be eligible for the government top-up.
Good new though - this year’s contribution remains unchanged. If you're eligible, you can still receive the full $521.43 in 2025 before the new rates kick in for next year.
Further changes include the government introducing an eligibility cap to KiwiSaver contributions. From 1 July 2025, if your income is over $180,000, you will no longer be eligible for the government’s KiwiSaver contribution. This determination will be based on one of your two most recent tax returns.
Any Changes Concerning Younger Members?
Currently, KiwiSaver benefits do not apply to 16- and 17-year-olds That is set to change. The changes are aimed towards helping young people get a head start on saving for their first home and assist in building better saving habits for the long run.
From 1 July, 16- and 17-year-olds will be eligible to receive the government’s $260.72 contribution if they contribute the contribution threshold of $1,042.86 per annum. In April 2026, employers will be required to make KiwiSaver contributions for their 16 and 17 year old employees, for those employees who already have the employer contribution prescribed in their employment agreement, there will be no changes.
What Does This Mean for the Future of KiwiSaver and Your Business?
These changes are said to be all about encouraging Kiwis to build stronger savings habits, while keeping the scheme affordable for the country.
Raising the default contribution rate to 4% means KiwiSaver balances will grow more quickly, helping to provide greater financial security for individuals. By accelerating savings growth, the government aims to strengthen both personal financial futures and the broader economy.
If you’re concerned about how these changes may impact you – whether as an employer or employee – or you’re unsure on how to navigate them, our experienced employment team is here to help. With extensive combined expertise in employment law, Brad and Sally will ensure your interests are protected, giving you peace of mind throughout the process.
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