By Shamubeel Eaqub, Chief Economist - Simplicity Research Hub


Finance Minister Nicola Willis has announced major changes to KiwiSaver as part of Budget 2025, aiming to make the scheme more “fiscally sustainable” while continuing to support New Zealanders saving for retirement or a first home.

Here’s a breakdown of the key changes, what they mean, and how you can respond.

1. Contribution rates are increasing

The default employee and employer contribution rate will gradually rise from 3% to 4% by 2028:
- From April 2026, contributions increase to 3.5%
- From April 2028, they increase again to 4%

This is a positive step. Increasing contribution rates helps grow long-term retirement savings - and we think over time we should go further (Australia is heading to 12.5%).

But there’s a catch: to receive employer contributions, you still need to contribute yourself. There higher contribution rate could discourage lower-income earners from participating. We believe it’s time to de-link employer contributions from employee contributions, to ensure all workers benefit equally - regardless of income.

2. Government contributions are being halved 

From 1 July 2025, the annual government contribution will drop from $521 to $260.72, and you’ll still need to contribute at least $1,042.86 annually to receive the full amount. In addition, those earning over $180,000 will no longer be eligible for any government contribution.

This means-tested approach makes sense in principle — as those who are high income are generally saving sufficiently — but it also highlights a wider inconsistency. Incentives for Kiwis to save for their future are being cut and means-tested (at a cost just under $1 billion), while New Zealand Super, which is universal welfare for older people and costs $23 billion is untouched. 

For many, this change also partially offsets the government’s recent income tax cuts, especially for low- and middle-income earners.

3. Contributions for 16–17 year olds

16- and 17-year-olds will become eligible for government and employer contributions. This is a good move.
- From 1 July 2025, they can receive the government’s annual contribution.
- From 1 April 2026, they’ll qualify for employer contributions if working and contributing.

Young people should have the same opportunity to benefit from KiwiSaver’s long-term growth. This change recognises that the earlier you start saving, the better.

How should you respond?

These changes may sound significant  but the core principles of building a strong retirement remain the same.

Here’s how you can respond:
- Talk to your employer about your total remuneration. There should be no difference between total income whether you contribute to KiwiSaver or not.

- Plan ahead for next years increasing contribution rate. The changes are gradual and should be manageable with some forethought.

- For young people, or those of you with 16 and 17 year olds in the house, make sure you start contributing as soon as you can to take advantage of the new entitlements.

- And most importantly — stay the course. Nothing fundamentally changes. The best retirement outcomes still come from saving regularly and consistently over time.

This is Simplicity Research Hub’s independent expert commentary and thought leadership on economic trends and policies of interest to all New Zealanders. This content is our opinions and is provided for general information only. It does not relate to your particular financial situation or goals and is not financial advice or recommendations. Any external resources provided are accessed at your own risk and the Simplicity Research Hub takes no responsibility for third party content and does not approve, recommend, or endorse any external websites or the content they contain.