Why The Government Contribution To KiwiSaver Is Still Worth It
Why $260.72 is still worth it
From July 2025, the annual government contribution will be decreased to 25 cents for each dollar a member contributes – the maximum top-up will be $260.72.
What's a mere $260.72 worth anyway? It might not seem like much, but thanks to compounding returns over time, it can still add up to quite an impressive sum.
If you contributed enough to get the government contribution every year from age 30-65 and were in an aggressive fund, you could have approximately $137,873.38 by the time you withdrew at age 65 (ignoring tax and inflation). That's even if you only made the minimum $1,042.86 contribution each year and never made any additional contributions via wages or salary, nor got any employer contributions.
To put the spotlight just on the amount the Government puts in (setting aside the $1,042.86 contribution you'd have to make to trigger it [1]), this figure could potentially triple over the 35-year lifespan of the KiwiSaver investment. The Government's $260.72 over 35 years is just over $9125.2, but it could be worth more than $27,575.10 at retirement thanks to returns at an assumed rate of 5.5%, which compound over time. Again, we've ignored tax and inflation, to keep it simple.
Note: These assumptions use a 5.5% return rate, in line with government-prescribed assumptions for projecting returns on aggressive KiwiSaver funds, even though this is a relatively conservative estimate for many growth-oriented investments. For example, Generate's Focused Growth KiwiSaver Fund has delivered an annualised return of 9.25% since inception (as at 30 April 2025) — almost double the government's prescribed projection rate for aggressive funds.
Smart savers don't miss out
As these calculations show, the Government contribution to KiwiSaver is still of value, and KiwiSaver members will do well to try and achieve it every year they're eligible.
However a report by financial advisory service National Capital estimates nearly a million people are missing out on it each year. [2]
At Generate we're proud to say that more than 85 percent of our members received the Government contribution in 2024 – that was a bonus of almost $54 million ($53,945,801.84 to be exact.)
That high ratio has been a consistent trend with our Generate members, and we attribute it to the power of advice. More than 90 per cent of our members have received a KiwiSaver advice session with us, we believe that keeps them informed and empowered to maximise their KiwiSaver investment.
It also helps that they can see how they're tracking in our Generate app, which notifies them if there's a shortfall they need to make up by June 30.
With markets in an era of volatility, KiwiSaver investment returns can be very unpredictable. Even though it's now reduced, a sure bet like the Government contribution is definitely still worthwhile.
Background - key changes to the government contribution
The Government contribution has always been a key benefit of KiwiSaver, ever since the scheme launched in July 2007. The latest Government budget, delivered on May 22, cut this bonus in half.
From July 2025, the annual government contribution will be decreased to 25 cents for each dollar a member contributes – the maximum top-up will be $260.72.
Previously, there was an annual top-up of $521.43, if you contributed $1,042.86 to your KiwiSaver account between 1 July of the previous year and 30 June of the current year (so long as you met the eligibility criteria [3]). This was 50 cents to every dollar.
What's more, those who earn over $180,000 per year will now not receive the Government contribution at all. According to the IRD [4], as of 2024, 3.4% of wage and salary earners in New Zealand earned $180,000 or more, which is also when the top tax bracket kicks in.
These changes are expected to save the Government up to $3 billion over the next four years.
In positive news, Finance Minister Nicola Willis said the Government would start paying the Government contribution to 16- and 17-year-olds.
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