Budget 2025 introduces significant changes to KiwiSaver, including increased contribution rates, reduced government contributions, and expanded eligibility for younger workers.
Key Changes to KiwiSaver
- Increased Contribution Rates
The default employee and employer contribution rates will rise from 3% to 3.5% starting 1 April 2026, and then to 4% from 1 April 2028. Employees will have the option to temporarily remain at the current 3% rate if needed. Members can temporarily opt down to 3% for up to 12 months.
- Reduced Government Contributions:
The government will halve its annual contribution from 50 cents to 25 cents for every dollar contributed by a member, with a new maximum of $260.72 per year, effective 1 July 2025. Members must still contribute at least $1,042.86 annually to receive the full government contribution.
- Eligibility Changes:
The government contribution will now extend to 16 and 17-year-olds who are employed, starting 1 July 2025, with employer matching contributions beginning 1 April 2026.
However, the scheme is now means tested, individuals earning over $180,000 will no longer be eligible for the government contribution from 1 July 2025.
Implications for Individuals
- Act before 30 June 2025 – Make sure to contribute at least $1,042.86 before 30 June to receive the existing $521 government credit.
- Plan for increased contributions – Budget for the upcoming 3.5% to 4% increases in 2026 and 2028. Understand that whilst you can opt down (3%), doing so slows your wealth accumulation.
- Know your thresholds –High earners (> $180k) will no longer receive government top-up; re-evaluate savings expectations accordingly.
For Employers & Business Owners
- Adjust payroll systems – Ensure capability to handle rising default rates—first to 3.5%, then 4%, and special rates for those opting down .
- Review employment contracts –Add new terms to address KiwiSaver opt-down, 16–17 year-old coverage, and government contribution changes. Encourage younger staff (16–17) to join earlier and benefit from incentive, and help them build good financial habits early.
- Manage cashflow and budgeting – Increased employer contribution may impact payroll budgets. Plan ahead to avoid surprise costs .
- Communicate clearly with staff – Provide early notice about changes and training to help employees understand what they mean for take-home pay.
- Explore the Investment Boost – Budget 2025 also introduces a 20% tax deduction for new business asset purchases . Consider this alongside KiwiSaver changes when planning capital expenditure.
Sustainability Focus:
These changes aim to make the KiwiSaver scheme more fiscally sustainable while encouraging New Zealanders to save more for their first home and retirement. The government emphasizes that these adjustments will help increase the overall savings for individuals by the time they reach retirement age.