2025 Budget - KiwiSaver Changes

By now you may have heard about the budget today, and some of the changes to KiwiSaver.

{edited to correct some dates i got wrong while tired at the airport late at night}

I am not going to talk about the politics of it all, but more just the changes to KiwiSaver and what this might mean to you and some things to consider. I will try to keep this as short as possible but it may be a little long.

The changes are:

1.      Government Contribution Reduced

a.      Means testing introduced

2.      Increased Contribution Rates

3.      Expanded Eligibility for Younger Members

Government Contribution reduced:

The annual government contribution to KiwiSaver accounts is halved from 50 cents to 25 cents for every dollar contributed by savers, up to a maximum of $260.72 per year, effective from July 2025.

This means that if you put in $1042.86 from July 1 to June 30 each KiwiSaver year, you will get $260.72 rather than $521.43.

It’s a bit of a bummer they did not keep the ratio the same and reduce the amount, so you could get the same from the government for half as much as this would help lower income people but it is what it is.

Nothing to do here, just keep putting in enough each year. This KiwiSaver year ending 30 June 2025 is still on the current rules.

Means testing introduced

Individuals earning over $180,000 annually will no longer receive any government contribution to their KiwiSaver accounts, starting in July 2025.

The government contribution, which will be halved to 25 cents per dollar contributed up to a maximum of $260.72 annually, will not be available to individuals with an income exceeding $180,000. This threshold aligns with the top tax bracket in New Zealand.

Assessment Method: Eligibility for the government contribution will be determined based on the individual’s income from one of the last two tax years, once their final tax return is finalized. This approach allows Inland Revenue to use verified income data from tax returns to assess eligibility.

Process: KiwiSaver providers will continue to claim the government contribution on behalf of members, and Inland Revenue will cross-check income data from tax returns to confirm eligibility. If an individual’s income exceeds $180,000 in either of the two most recent tax years, they will be ineligible for the contribution for that KiwiSaver year (July 1 to June 30).

We don’t know what this means for those who are self employed with variant income, or who income split and how dividends work, but more will come from accountants and government over time.

If you currently income split or are close to a payrise to over $180 000 it might be worth reviewing this and negotiating to account for the loss of the government contributions.

Increased Contribution Rates:

The default employee and employer contribution rate will rise from 3% to 4% of wages, implemented in two steps over three years. Employees can opt to remain at 3% for up to a year at a time.

This change will be implemented in two stages over three years:

Stage 1 (1 April 2026): The default contribution rate for both employees and employers will rise to 3.5% of gross wages.

Stage 2 (1 April 2028): The default contribution rate will further increase to 4% for both employees and employers.

Employees can opt to remain at the 3% contribution rate for up to one year at a time by notifying their employer. This opt-out must be renewed annually if the employee wishes to continue at the lower rate.

Employer Contribution Requirements:

Employers will continue to match employee contributions at the new rates (3.5% from April 2026, then 4% from April 2028), subject to existing rules around total remuneration packages where applicable.

This is the one you most need to be aware of, as if you are on salary you will be impacted from April next year year. If you can cover it I suggest you let it go up to 3.5% (if you are only on 3% currently) as you will also get the additional employer contribution.

To calculate what this will cost you, take your income and divide it by 100 and then by half again. So if you are on $70 000, divided by $700, and then halved is another $350 a year, and this is about $13 a fortnight.

If you cannot cover this, then opt for the reduction, but be aware its only for 1 year.

Expanded Eligibility for Younger Members:

From 1 July 2025 , 16- and 17-year-olds will be eligible for government contributions, and employers will be required to match their contributions from April 2026, expanding access to the scheme.

Currently employers do not have to contribute to members KiwiSavers for those under age 18 (though many do) but now they will have to (from April next year).

So if you have kids this will impact, you have a year to get them to look over their KiwiSaver. I very much recommend that kids do the 3.5% (or more) to get their money started. Every dollar they put in that they leave for 50 years, is worth $33 at 50 years, this is a massive return over time.

So in summary, more changes, nothing super major that changes the core of KiwiSaver. The 4% minimum was supposed to be in place in 2007/8 but the GFC delayed this, if we are ever to catch up with Australia this is needed. And expanding out to 16 year olds is just fair.

The reduction in government support sucks but it was only there to get people bribed into joining and KiwiSaver is pretty well covered now.

Let us know if you have any questions and if you want to book in for a review of your KiwiSaver, don’t hesitate to reach out – you can book with us at - https://www.duxfinancial.co.nz/contact