The New Zealand government’s Budget 2025 introduces important changes to the KiwiSaver scheme aimed at helping employees save more effectively for their first home and retirement, while also managing long-term fiscal sustainability of the scheme. The changes will take effect on various dates, starting from 1 July 2025.
Background
KiwiSaver is an occupational retirement savings scheme that helps New Zealanders save for retirement and their first home. Employees may choose to opt in or out of KiwiSaver, but employers must make KiwiSaver available to all eligible employees. If a new employee is not already a KiwiSaver member but is eligible to participate, an employer must automatically enroll them in KiwiSaver. Eligibility typically includes employees aged over 18 and under 65 who live in New Zealand and are either citizens or legal residents. These employees have the option to remain in the scheme or opt out between the end of the second week (from day 14) and eighth week (to day 56) of their new employment.
While KiwiSaver is a voluntary scheme for employees, based on the Financial Markets Authority’s KiwiSaver Annual Report 2024 (opens a new window), KiwiSaver membership as of 31 March 2024 had reached 3,334,654. This is out of a working-age population of approximately 4,297,700 for the quarter ended 31 March 2024, as reported by Stats NZ here (opens a new window). The substantial participation rate indicates KiwiSaver’s pivotal role in New Zealand’s retirement planning framework.
The changes introduced to KiwiSaver by Budget 2025 have been implemented through the Taxation (Budget Measures) Act 2025, which was enacted on 29 May 2025.
Key details
Key details for employers to note include the following:
Increases in minimum contribution rates
Currently, employees may choose to contribute either 3%, 4%, 6%, 8% or 10% of their pay (before taxes). If they do not choose a contribution rate, a minimum rate of 3% will apply by default. The current compulsory minimum contribution rate for employers is also 3% of employees’ gross pay.
The minimum KiwiSaver contribution rates for both employees and employers, currently 3% each, will be gradually increased under Budget 2025 as follows:
From 1 April 2026: 3.5% of the employee’s gross pay for both the employer and the employee.
From 1 April 2028: 4% of the employee’s gross pay for both the employer and the employee.
Employees who find the increased minimum contributions challenging to afford can apply for a temporary rate reduction back to 3%, for a period ranging from 92 days to one year. Employers will match this reduced rate accordingly.
Adjustments to government contributions
From 1 July 2025, the annual KiwiSaver government contribution will be halved from 50 cents to 25 cents for every dollar contributed by a member. The maximum annual government contribution will also decrease from NZD 521.43 per year to NZD 260.72 per year.
Under the current KiwiSaver law, members earning over NZD 180,000 annually are still eligible to receive government contributions, provided they meet other criteria such as on minimum age (see below) and residency. However, from 1 July 2025, members earning over NZD 180,000 annually will no longer receive any government contributions.
These changes will not affect the government contributions paid out in July/August 2025 for the current financial year.
Government and employer contributions for younger workers
Currently, only workers aged 18 or older are eligible to receive government and employer contributions under KiwiSaver.
From 1 July 2025, 16- and 17-year-old workers will also be eligible for government contributions (see above for the adjustments to government contributions from 1 July 2025).
Additionally, from 1 April 2026, employers will be required to make KiwiSaver contributions for workers aged 16 and 17 at the new compulsory minimum rate of 3.5% (see above for details on the scheduled increases in minimum contribution rates).
Employer action: PREPARE TO ACT
The main changes affecting employers will take effect from 1 April 2026, giving employers time to prepare. Employers should review and update their internal KiwiSaver policies and processes, including making necessary adjustments to payroll systems to implement the scheduled increases in minimum KiwiSaver contribution rates starting 1 April 2026. Employers who employ younger workers should plan to start making employer contributions for 16- and 17-year-olds beginning 1 April 2026.
Employers may also wish to proactively inform employees about the upcoming changes, including the option for employees to apply for a temporary reduction to the original 3% contribution rate if needed, and the adjustments to government contributions, particularly that employees who earn over NZD 180,000 will no longer receive government contributions from the next financial year. The government has published a factsheet here (opens a new window) on the KiwiSaver changes, including its implications on members’ KiwiSaver balances.
Further Information
Budget 2025 - 22 May 2025 (opens a new window)
Taxation (Budget Measures) Act 2025 No 26 | New Zealand Legislation (opens a new window)
