Budget 2025: Default KiwiSaver rates to increase from 3% to 4%

Thursday, 22 May 2025

At a glance

*The default employee contribution will rise to 3.5%, then 4%

*Those earning over $180,000 will no longer receive a Government contribution

*The Government contribution for eligible members will halve

KiwiSaver changes

In a bid to boost Kiwis' retirement savings, and increase local investment, the Government is increasing the default KiwiSaver contribution rate, to 3.5% next year and then 4% by April 2028.

The current default rate is 3% but that will incrementally increase to 3.5% from April 1 next year, rising to 4% from April 2028. Employers will have to match the default rate.

The scheme will also be extended to 16 and 17-year-olds, from April 1, 2026 - they will need to opt in, as the automatic enrolment will remain at 18.

The Government contribution rate, however, will reduce by half, from 50c for each dollar a member contributes to 25c, from July 1 this year. That means the maximum Government contribution for each eligible member (one who contributes a minimum of $1042 a year) reduces from $521 to $260. The changes won't affect the current year - the Government contributions for this year are set to be paid in July and August.

And, those earning over $180,000 will no longer receive a Government contribution.

Eligibility will be assessed according to one of the last two tax years, using either the member's income for the previous tax year, or the year before that, depending on when the final tax return is finalised.

'Putting those 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,' said Finance Minister Nicola Willis.

'Phasing in the increases will help workers and employers plan ahead.'

Willis, asked about impacts on small businesses, said Government had given them enough time to prepare.

'Overall I think this is a Budget that is very good for employers … employers want to see their workers have more financial security, KiwiSaver has been an incredible tool for that.'

How much people's overall nest egg will grow depends on a variety of things, but modelling showed balances rising by 25% or more, Willis said. (There is a chart at the bottom of this story.)

First home withdrawal rules remain unchanged.

Employees will have the temporary option at the 3% rate and have that rate matched by their employer. Their contributions would reset to the default rate after 12 months but they can opt down again.

Willis said the increase in KiwiSaver balances will grow the investment fund pool. The Reserve Bank estimated about 40% of balances were invested in New Zealand assets.

As of March 31, 2024, KiwiSaver membership was 3.3 million with $118b in management. The average member balance is $33,514.