New Zealand has a well-documented retirement savings gap, and compared to countries like Australia - where compulsory contributions are already around 12% - we’re still playing catch-up. Gradually increasing KiwiSaver contribution rates is one way to help close that gap over time.

From 1 April 2026, the default KiwiSaver contribution rate will increase from 3% to 3.5% for both you and your employer. While this is a positive step, it will mean a small drop in take-home pay for most people — and with the cost of living still high, it’s completely understandable if that feels a bit challenging.

What does this mean for your pay?

For someone earning around $75,000 a year, this change could reduce take-home pay by about $750 per year or roughly $60 per month.

If you’re on a total remuneration package (where the employer’s KiwiSaver contribution is included as part of your salary), the impact could feel more significant, as your employer’s increased contribution may effectively come out of your pay.

Why the increase matters over time

While the short-term impact needs to be considered, the long-term benefit can be significant. Research from the Retirement Commission shows that for a 35-year-old earning $80,000, increasing contributions from 3% to 4% could lead to around a  25% larger KiwiSaver balance at retirement.  That’s a meaningful difference, driven by the extra contributions going in each pay cycle, and the power of compounding returns over time.

What are your options?

If you’re currently contributing 3%, the new rate will apply automatically. If the increase isn’t manageable right now, you can choose to temporarily stay at 3% for 3 months, up to a year. You need to do this via the IRD.

A quick heads up though! If you do opt to stay at 3%, your employer may also keep their contribution at 3%. That means you could be missing out on:

• Your additional 0.5% contribution

• The additional 0.5% employer contributions

• The long-term growth on those extra contributions

Finding the right balance

There’s no one-size-fits-all answer here. We know there’s a retirement savings gap in New Zealand, and gradually increasing contribution rates is a step in the right direction - even if it takes time to adjust.

If you can afford the increase, it can make a meaningful difference to your future savings. If things feel tight right now though, it’s okay to prioritise your current budget. Just make sure you revisit your contribution rate as soon as things feel more manageable.