Budget 2025: Retirement saving for 80 percent of NZers to increase under KiwiSaver changes, analysis finds
RNZ / Samuel Rillstone
KiwiSaver changes revealed in Thursday's Budget are expected to increase retirement savings for about 80 percent of the scheme's contributing members, an analysis by the Retirement Commission has found.
That's despite the reduction in government contributions to member's balances.
From 1 July, the government contribution towards an individual's KiwiSaver is decreasing to 25 percent (i.e. 25 cents for every $1 contributed, to a maximum of $260.72). Anyone earning over $180,000 will not be eligible for any government contribution at all.
Meanwhile, employee and employer contributions to KiwiSaver would move to a default of 3.5 percent from 1 April 2026 and then to 4 percent from 1 April 2028.
Retirement Commissioner Jane Wrightson said the analysis revealed New Zealanders' KiwiSaver funds could last 30 percent longer than under pre-Budget 2025 settings - at least for median salary and wage earners who contributed without interruption over a 40-year working life.
"This is great news for most KiwiSaver members but it's clear further work needs to be done to consider how we can better support the other 20 percent who are missing out on savings, which includes low-income earners, the self-employed, and many women, Māori and Pacific Peoples," she said.
"While we're pleased to see the government take on board the key recommendations we made in 2024 around increasing the default contribution rate of 4 percent, I would at least have liked to see some of the savings from reducing government contributions be applied to serving these groups where we see the widest retirement savings gaps."
Approximately 1.8 million salaried and wage-earning KiwiSaver members (90 percent) are expected to have higher eventual retirement savings balances, including those with incomes above $180,000.
Generally, both low- and high-income earners would benefit from the change, but low-income earners would be more impacted by the decrease in government contribution as this made up a greater portion of their eventual retirement savings.
About 200,000 members, or 10 percent, are not expected to benefit from the change.
This includes people who already have employer and employee contributions at 4 percent and who are on low incomes or are close to age 65.
Self-employed and unemployed people - who do not receive an employer contribution - would see a decrease in their KiwiSaver retirement savings balance compared to what they may have expected previously.
The Sorted KiwiSaver Calculator has been updated so people can use it to see how the changes will impact them, the commission said.
The Budget revealed employee and employer contributions to KiwiSaver would move to a default of 3.5 percent from 1 April 2026 and then to 4 percent from 1 April 2028.
Photo:
RNZ / Samuel Rillstone
The analysis also revealed Thursday's changes could halve the $1 billion spent by the government on KiwiSaver contributions in 2024.
About two-thirds of KiwiSaver members (2.2 million people) received the government contribution, with about 77 percent receiving the full amount of $521.43.
While the changes might lower the governments bill, it would increase KiwiSaver spend for employers.
Most currently contributed the minimum rate of 3 percent to KiwiSaver, Wrightson said, and a qualitative study with 25 business found a range of views on raising the minimum rate.
"Not surprising, some, especially those in industries with tight margins such as hospitality, raised concerns about increased labour costs, reduced profitability, and flow-on effects to other areas of the business and employee remuneration. However, others, typically larger organisations or those with progressive HR policies, saw value in supporting employees' long-term financial wellbeing and were more open to higher contributions," she said.
"We know these KiwiSaver changes will mean a higher cost for employers, but the gradual increases planned through the setting changes will give businesses the time they need to get ready.
"It's important that this doesn't result in more businesses including KiwiSaver as part of total remuneration, as this is something we've been calling to be banned for some time."
The commission will continue to explore the impacts of the KiwiSaver changes as part of its 2025 Review of Retirement Income Policies, with a focus on how the government could most effectively reduce gaps in retirement income outcomes. The final report is expected to be completed by December.
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