According to the most recent KiwiSaver report, there are 3.33 million KiwiSaver members. That means the changes to KiwiSaver announced recently as part of Budget 2025 have the potential to impact a lot of Kiwis.

Research from Te Ara Ahunga Ora Retirement Commission estimated that up to 80% of savers will benefit from the changes, however financial security in retirement still isn’t guaranteed. Another study by Massey University study (Retirement Expenditure Guidelines pdf) found that a comfortable retirement in a major NZ city could cost a mortgage-free couple up to $1.2 million, a goal many won’t reach without careful planning.

This blog unpacks what’s changing - including a halved government contribution for most earners, a staged increase in compulsory contributions from 3% to 4%, a new temporary opt-down option, and extended eligibility for 16- and 17-year-olds - and what it might mean for you.

These changes may require a few adjustments, but they also offer an opportunity to reassess your path and make sure you’re still heading in the right direction.


KiwiSaver contributions are on the rise - but the impact will vary

From 1 April 2026, the minimum KiwiSaver contributions from both employers and employees will increase from 3% to 3.5%, and then rise again to 4% in April 2028.

The Retirement Commission research showed that for a 35-year-old earning $80,000, that could mean a 25% bigger balance at retirement, which is a meaningful increase. But raising the contribution level is not guaranteed to benefit everyone equally.

This is going to have an impact on our take home pay. Shamubeel Eaqub, our chief economist explained that for an average person earning $75,000, could see their take home pay fall by $750 a year (ref). And if you're on a Total Remuneration package (where KiwiSaver contributions are included as part of your salary), those extra employer contributions may also come out of your own pay. The Retirement Commission points out that up to 45% of employers in New Zealand use this structure, which means a significant portion of NZ workers could feel doubly out of pocket - at least in the short-term.

And for those of us who are lucky enough to have an employer that already contributes more than the minimum, you might not see any increase at all.

Still, we know there is a retirement gap and that we need to increase our contributions, so this is a step in the right direction. Even if it does leave us still lagging behind our Australian cousins (where contributions to Aussie Super are already at 12%). And the slow rise of one percent staged over the next three years should mean employees and employers alike have time to accommodate the changes.


Reduced government contribution

From 1 July 2025, the government’s annual KiwiSaver contribution halved from $521.43 to $260.72, and was removed entirely for those earning over $180,000. While the incentive is smaller, it’s still free money — potentially adding $13,000 over a career, and much more with compounding returns.

To receive the full amount, you’ll still need to contribute at least $1,042.86 a year (about $20 a week). Even if you’re self-employed or contribute irregularly, a one-off top-up can be worthwhile.

Lower-income earners are most affected, as the government’s contribution makes up a larger share of their overall savings.

To offset the cut, you could consider increasing your own contributions - an extra $5 a week can close the gap - or you could consider saving outside of KiwiSaver for added flexibility, though this requires more self-discipline. The good news? For many, this change will be balanced out by rising compulsory contributions in the years ahead.


Temporary saving reduction - use wisely!
From February next year, KiwiSaver members will have the option to apply directly to IRD to temporarily reduce their employee contributions back to 3% from the 3.5% minimum rate that will apply from 1 April 2026 - that temporary reduction is for up to 12 months initially. This is not so much a reduction as maintaining the status quo. 

As the increased employee contributions come directly from people’s pay, this has a direct impact on people’s take home pay. With the pressure around the current cost of living this “reduction” provides some necessary flexibility, but buyer beware - your employer can match your contribution at the lower rate, so not increasing contributions could have a very real impact on your long-term growth. It is worth thinking of any suspension or lowering of KiwiSaver contributions as a last resort.


Earlier start for 16 and 17 year olds - time is your friend

Two small lines in the new legislation could make a big difference to the next generation of retirees. Sixteen- and seventeen-year-olds will become fully eligible for KiwiSaver incentives: government contributions from 1 July 2025 and compulsory employer contributions from 1 April 2026. 

The change recognises that the earlier you start saving, the better. It’s a great way to encourage young people to start thinking about the future and get into the habit of saving. And for a teen earning even modest part-time wages, that’s decades of extra compounding power.


How should you respond?

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

Here’s what you can do:

- Assess your retirement plan. Massey University’s $1.2 million figure for a big city, mortgage-free couple is a stark reminder that just contributing the bare minimum may not deliver you the retirement you want. Use our Retirement calculator (or log in to the member app to use the Future Projection tool) to check whether you are on track.

- Make sure you are in the right fund. Your KiwiSaver fund should align with both your timeline and risk tolerance to ensure you’re not taking on too much (or too little) risk to meet your retirement goals. And remember this can change over time. Take a look at our Fund Selector tool to see what fund might match your needs.  

- Talk to your employer. If you’re job hunting or have a salary review coming up, now’s as good a time as any to negotiate for your employer to cover any KiwiSaver uplift, as it will add up meaningfully over time.

- Build the higher deduction into your budget. The changes are gradual, so should be manageable with some forethought.

- Take advantage of new entitlements. For young people, or those of you with 16 and 17 year olds in the family, make sure you start contributing as soon as you can to take advantage of first government and then employer contributions.

Most importantly - stay the course

While the reduction in the government contribution may feel a bit mean-spirited, and the gradual increase in minimum contributions still leaves New Zealand behind international benchmarks such as Australia's Superannuation system, the overall impact of the 2025 KiwiSaver reforms is likely to be positive for most members.

These changes are expected to improve average retirement balances, support earlier engagement with KiwiSaver, and offer greater flexibility for those navigating cost-of-living pressures.

Ultimately however, nothing fundamentally changes. The best retirement outcomes still come from saving regularly and consistently over time.