New Analysis Reveals New Zealanders’ KiwiSaver Funds Could Last 30% Longer Than Under Pre-Budget 2025 Settings

Following the Budget 2025 news of changes to KiwiSaver, Te Ara Ahunga Ora Retirement Commission has released a series of papers providing a full analysis of what the impacts will be for contributing members.

The first paper reveals that the changes should increase retirement savings for around 80% of contributing KiwiSaver members, despite the reduction in government contributions or its removal entirely for those earning over $180,000.

Announced yesterday (Thursday), employee and employer contributions to KiwiSaver will move to 3.5% from 1 April 2026 and then to 4% from 1 April 2028. Alongside these changes, from 1 July, the Government contribution is decreasing to 25% (i.e. 25 cents for every $1 contributed to a maximum of $260.72).

Retirement Commissioner Jane Wrightson says, “Our findings show that the increase of the default employee and employer contribution settings could result in retirement funds lasting on average approximately 30% longer than under the pre-Budget 2025 settings for median salary and wage earners who contribute 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% who are missing out on savings, which includes low-income earners, the self-employed, and many women, Māori and Pacific Peoples.

“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%, 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.”

For salary and wage earners the net effect of the change will generally result in increased future KiwiSaver retirement savings for most (including those with incomes above $180,000):

• 90% of salary and wage earners (approximately 1.8 million members), are expected to have higher eventual KiwiSaver retirement savings balances.
  • Generally, both low- and high-income earners will benefit from the change, but low-income earners are impacted more by the decrease in government contribution as this makes up a greater portion of their eventual retirement savings.
• About 10% of salary and wage earners (approximately 200,000 members) aren’t expected to benefit from the change including:
  • People who already have employer and employee contributions at 4% or more.
  • People who have an employee contribution at 4% and who are on low incomes or are close to age 65.

For self-employed people and those not currently in paid work, who only receive the government contribution and no employer contribution, the change will result in a decrease in their KiwiSaver retirement savings balance compared to what would have been expected if there was no change

• In 2024 approximately 200,000 members received only a government contribution, including approximately 125,000 self-employed people.

The Sorted KiwiSaver Calculator has been updated so people can use it to see how the changes will impact them.

The Retirement Commission previously sought data from Inland Revenue to better understand the distribution of the Government’s contribution. The second paper shows $1 billion was spent on the KiwiSaver government contribution in 2024 and the changes to the contribution from 1 July could potentially halve this cost.

• About two-thirds (2.2 million) of KiwiSaver members received the government contribution.
• Of this group, 77% received the full government amount of $521.43.
• The majority (87%) of the total value of the government contribution was paid out as the full amount in 2024.

For members currently earning less than $30,000 the government contribution is currently expected to accumulate, over a 40-year time-period, to 15-20% of total KiwiSaver balances at age 65. After the Budget 2024 changes, this reduces to 6-11%.

For members earning $100,000, the percentage point change is much smaller, with the government contribution reducing from 5% down to 1% of accumulated balance, and from 3% down to 0% for members with earnings of $180,000.

The Retirement Commission’s third paper is a qualitative study conducted with 25 business delving into how a lift in employer contributions may be received given the majority currently contribute at the minimum rate of 3%.

Retirement Commissioner Jane Wrightson says, “Employers expressed a range of views on the potential impact of raising the minimum employer contribution rate to 4%. 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.

“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 Retirement Commission will continue to explore the impacts of the KiwiSaver changes as part of the 2025 Review of Retirement Income Policies (RRIP) with a focus on how government could most effectively reduce gaps in retirement income outcomes.

Scenario – impact for members increasing contributions from 3% to 4%

• A person who is currently 35 years old, on an average salary (approx $80k), the change results in a 25% higher KiwiSaver retirement balance at age 65 compared to the current settings;
• A 35-year-old who is earning $200,000 joining KiwiSaver from 2025 could expect their balance at age 65 to be about 27% higher than under the current settings.
• a 16-year-old earning $30,000 who is not currently contributing, but intended to begin contributions at 18 pre-change, is modelled to have about 26% more in additional savings between 2025 and age 65, compared to 22% for a currently contributing 16-year-old.
• The changes are generally positive for the eventual retirement savings balances of salary and wage earners who are currently contributing at 3% with an employer match of 3% as the benefit of the higher employer contribution offsets the decrease in the government contribution.

Notes:

The 2025 Review of Retirement Income Policies (RRIP)

Every three years the Retirement Commission is asked to undertake a comprehensive review of retirement income policies based on terms of reference set by the Government. The 2025 RRIP includes focus on research relating to KiwiSaver and other savings, emerging trends and how these will play out over the next 25 years, the experiences of women and the self-employed in retirement, spending down retirement savings and how New Zealand’s retirement policies compare globally. It will support the development of recommendations to ensure New Zealand’s retirement income system remains fit for purpose. The final report will be completed by December 2025.

More info: 2025 Review of Retirement Income Policies | Retirement Commission Te Ara Ahunga Ora

Analysis of Budget 2025 KiwiSaver changes: policy brief

The Retirement Commission has provided a comprehensive summary of the recent changes to KiwiSaver, including an overview outlining whose KiwiSaver retirement savings can be expected to increase and whose decrease compared to what would have been expected if no changes had been made. The paper also provides a distributional analysis of the impact of the changes on retirement balances and how the changes may impact on retirement adequacy.

Read the Retirement Commission’s full analysis of the Budget 2025 changes here: https://assets.retirement.govt.nz/public/Uploads/Retirement-Income-Policy-Review/2025-RRIP/KiwiSaver-Employer-Contributions-Qualitative-Report-2025.pdf

KiwiSaver Government Contribution Distributional Analysis 2025

To assess the distributional impact of the government contributions, Inland Revenue provided the Retirement Commission anonymised and detailed data that would enable insights based on age, gender3, income amounts, income types and geographic location for the tax years ended March 2022, 2023 and 2024. This report summarises the key findings from an analysis of the data.

Read the full report here: https://assets.retirement.govt.nz/public/Uploads/Retirement-Income-Policy-Review/2025-RRIP/KiwiSaver-Government-Contribution-Distributional-Analysis-2025.pdf

KiwiSaver Employer Contributions Qualitative Report 2025

This report presents findings from a qualitative study on employer perspectives regarding current and proposed changes to KiwiSaver contribution settings. The research involved 60-minute online in-depth interviews with 25 business owners and decision-makers representing a diverse range of industries and company sizes across New Zealand. Interviewing was conducted in March-April 2025.

Read the full report https://assets.retirement.govt.nz/public/Uploads/Retirement-Income-Policy-Review/2025-RRIP/Analysis-of-KiwiSaver-Changes-Budget-2025.pdf

Summary of the Budget 2025 changes

• Employee and employer contributions move to 3.5% from 1 April 2026 and then to 4% from 1 April 2028.
• A new temporary savings reduction will be introduced, modelled on the existing temporary savings suspension, allowing members to opt to reduce their contribution rate to 3% for a period of up to 12 months. Members can take multiple temporary reductions. If a member takes a savings reduction their employer can match them at that rate.
• The government contribution matching rate is reduced to 25% (i.e. 25 cents for every $1 contributed up to a maximum government contribution of $260.72) from the year commencing 1 July 2025.
• Members with an annual income of more than $180,000 will no longer be eligible for the government contribution from the year commencing 1 July 2025.
• 16- and 17-year-olds become eligible for employer contributions from 1 April 2026 (note they will not be auto-enrolled, the age for auto-enrolment remains at 18, but if they join, or have already joined, and contribute, they will be eligible for the matching employer contribution).
• 16- and 17-year-olds become eligible for the government contribution, if they contribute, for the year commencing 1 July 2025.

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