The 2025 Budget has delivered significant changes to KiwiSaver that will impact both employees and employers across New Zealand. These updates represent the most substantial reforms to the scheme in years, designed to boost retirement savings while maintaining flexibility for those who need it.
Key Changes Coming Your Way
Higher Default Contribution Rates
Starting 1 April 2026, the default employee and employer contribution rate will increase from 3% to 3.5%, then rise again to 4% from 1 April 2028. This gradual phase-in gives everyone time to adjust their budgets while ensuring stronger retirement outcomes in the long run.
Flexibility When You Need It
Recognising that life can be unpredictable, members will still have the option to temporarily opt down to the 3% contribution rate if financial circumstances require it. This safety valve ensures the changes don't create undue hardship during tough times.
Bringing Young Kiwis Into the Fold
From 1 July 2025, 16- and 17-year-olds will start receiving government contributions to their KiwiSaver accounts. From 1 April 2026, they'll also benefit from employer matching contributions. This early start will give younger New Zealanders a significant head start on their retirement savings journey.
Targeted Government Support
The government contribution structure is becoming more focused. The new system will provide 25 cents for every dollar contributed (up to $260.72 annually) for those earning under $180,000. While this reduces the maximum government contribution from the previous $521, it better targets support to those who need it most.
What This Means for You
For Employees
Your retirement balance will grow faster with higher contribution rates, but you'll also see slightly less take-home pay once the changes are fully implemented. The good news is that your employer will be contributing more too, effectively giving you a pay rise that goes straight into your retirement fund.
For Employers
You'll need to budget for higher KiwiSaver contributions and may need to update payroll systems. Consider how you'll communicate these changes to your team and whether you want to phase in any adjustments to total compensation packages.
For Young Workers
If you're 16 or 17, this is fantastic news. Getting government contributions and employer matching from such an early age means compound interest will work in your favour for decades.
Planning Ahead
These changes reflect the government's recognition that New Zealanders need stronger retirement savings to maintain their lifestyle after retirement. While the transition may require some budget adjustments, the long-term benefits are substantial.
If you're unsure how these changes will affect your specific situation, now is a great time to review your retirement planning strategy. Consider whether you need to adjust other savings goals or investment approaches to accommodate the higher KiwiSaver contributions.
The changes also present an opportunity to engage with your KiwiSaver provider about investment options and ensure your funds are working as hard as possible for your future.
Ready to discuss how these Budget 2025 changes impact your retirement plan? Get in touch – we're here to help you navigate these updates and make the most of your financial future.
Paula Enticott is a Financial Adviser at Stewart Group, a Hawke’s Bay and Wellington-based CEFEX & BCorp certified financial planning and advisory firm. Stewart Group provides personal fiduciary services, wealth management, risk insurance and KiwiSaver scheme solutions. Blog No 18.
The information provided, or any opinions expressed in this article, are of a general nature only and should not be construed or relied on as a recommendation to invest in a financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any financial decisions. A disclosure statement can be obtained free of charge by calling 0800 878 961 or visit our website, www.stewartgroup.co.nz
