KiwiSaver contribution rates to increase; Cuts to Govt contribution
The Government is increasing contribution rates to KiwiSaver, but at the same time reducing, and in some cases, removing the member tax credit.
Thursday, May 22nd 2025, 2:06PM
Key Points:
- Eligibility Extended to 16- and 17-year-olds:
- KiwiSaver Government contributions and employer matching will now be extended to 16- and 17-year-olds.
- Default Contribution Rate Increases from 3% to 4% by April 2028.
- Government contribution will be removed for KiwiSaver members with taxable income over $180,000 per annum.
- The rate of the Government contribution will be halved from $521 to $260.72.
The Government has announced in the Budget that the default contribution rate of employee and matching employer KiwiSaver contributions will rise from 3 to 4% of salary and wages, phased in over three years.
However, members will have the choice of remaining on the 3% rate if they choose.
In a move to save the Government money it has announced that the annual Government contribution rate will halve from $521 a year to $260.72.
However, for those earning more than $180,000 a year the contribution will go altogether.
Finance Minister Nicola Willis says the change has been made to ensure the scheme’s costs to the taxpayer remain sustainable.
The KiwiSaver changes are expected to save the Government up to $3 billion over the next four years.
On the positive side the Government has extended the Government contribution, and employer matching, to 16 and 17-year-olds in the workforce.
Willis says; “Putting these changes together, the KiwiSaver balances of employees contributing at the new 4% default rate will grow faster than they do at the current 3% default rate, providing a larger balance at age 65 and a larger deposit when people use KiwiSaver to buy their first home.
The new 4% default rate will be introduced in two steps. From April 1, 2026 it will go to 3.5% and, from April 1, 2028 it will go to 4%.
Phasing in the increases will help workers and employers plan ahead, she says.
“The Government recognises there will be times when some people do not feel able to contribute a higher proportion of their wages and salaries to KiwiSaver. Therefore, employees will be able to opt to contribute at a lower 3% rate and have that that lower rate matched by their employer. Their contributions will be reset to the default rate after 12 months, but they can opt down again if they wish.
Changes to the government contribution will take effect from July 1 this year. "The changes will not affect the government contribution for the current year, which will be paid out in July and August this year."
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