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What Changes Have Been Made to KiwiSaver?

Investment

| Last updated:

01 April 2026

|

Joseph Darby

KiwiSaver Scheme contribution rates have increased from April 2026, the Government contribution has been halved, and new withdrawal rules are proposed for specific workers. Here's the full picture, and what to do about it.

KiwiSaver is New Zealand's voluntary workplace retirement savings scheme, overseen by Inland Revenue and the Financial Markets Authority (FMA). With almost 3.4 million members and $123 billion in funds under management, it is the cornerstone of how most New Zealanders save for retirement. It is also, as history keeps demonstrating, a scheme governments cannot resist adjusting.

The latest round of changes, legislated through the Taxation (Budget Measures) Act 2025, is one of the most significant since the scheme launched in 2007. Some of these changes are genuinely positive. Others are harder to swallow. And a further batch of proposed changes is already in the pipeline. Below is a clear look at what has happened, what is coming next, and what it means in practice.

What Has Actually Changed?

Three main changes were introduced through Budget 2025. Two were already in force from mid-2025 and a third took effect on 1 April 2026.

1. Default Contribution Rates Have Increased

The minimum default KiwiSaver Scheme contribution rate for both employees and employers increased from 3% to 3.5% of gross pay on 1 April 2026. A further increase to 4% follows on 1 April 2028. If you were on the 3% default rate, both your contribution and your employer's increased automatically. You do not need to do anything.

On an $80,000 salary, the shift from 3% to 3.5% means an extra $400 per year going into your KiwiSaver Scheme investment, split evenly between you and your employer. Your take-home pay drops slightly. For most people, the difference works out to a couple of flat whites a week.

If the timing does not suit, you can apply to Inland Revenue for a temporary rate reduction to stay at 3% for between 3 and 12 months. You can reapply as often as you like. One thing worth noting: if you opt down, your employer can also choose to match at the lower 3% rate. You would then lose both the extra from your pay and the extra from your employer. Worth thinking carefully before opting out.

If you already contribute at 4%, 6%, 8% or 10%: your employee contribution rate will not change. However, if your employer was previously contributing the 3% minimum, their contribution has risen to 3.5%.

2. The Government Contribution Has Been Halved

From 1 July 2025 (already in force), the Government's annual top-up was cut from 50 cents per dollar contributed to 25 cents, with the maximum annual contribution dropping from $521.43 to $260.72. You still need to contribute at least $1,042.86 per year to receive the full amount.

If you earn $180,000 or more per year, you are now completely excluded from the Government contribution. The Government says these changes will save taxpayers up to $3 billion over four years. From a member's perspective, one of KiwiSaver's most compelling incentives has been meaningfully weakened.

If you earn under $180,000, you still receive the Government contribution, but at half the former rate. For lower earners, the Government contribution was proportionally a more significant part of total balance growth, so this cut hits hardest where it arguably should not.

3. Younger Workers Can Now Benefit

Previously, 16- and 17-year-olds could join a KiwiSaver Scheme with parental consent but received neither the Government contribution nor employer contributions. From 1 July 2025, eligible 16- and 17-year-olds receive the Government contribution, and from 1 April 2026, they now also qualify for compulsory employer contributions at 3.5%.

Auto-enrolment still begins at age 18, so younger workers need to proactively opt in. But for a teenager entering the workforce, even small contributions at this age have decades of compounding ahead of them. This is unambiguously a good change.

What It Adds Up To

According to the Retirement Commission's post-Budget analysis, around 80% of contributing members will end up with higher balances under the new settings, mainly because the increase in employer contributions more than offsets the loss of Government top-up for most earners. Their modelling shows a 35-year-old on an average salary of $80,000 could see a roughly 25% higher KiwiSaver Scheme balance at retirement compared with the old settings.

But the picture is not uniform. For higher earners above $180,000, the Government contribution disappears entirely. For self-employed members who do not receive employer contributions, the halving of the Government top-up is a net loss with nothing to offset it. And for those who opt for a temporary rate reduction to stay at 3%, the maths could go backwards if their employer also drops to match.

More KiwiSaver Changes Are on the Way

If you were hoping the adjustments would stop, the Government has already signalled further KiwiSaver Act amendments. A bill is expected to be introduced to Parliament in mid-2026 with two targeted changes. These proposals may still be modified or not proceed as described, since they have not yet been legislated.

Service Tenancy Workers

People whose jobs require them to live in employer-provided housing have historically been unable to use a KiwiSaver first home withdrawal because they could not meet the requirement to live in the property they purchased. This affects farm workers, rural teachers, police in country postings, and defence personnel. Finance Minister Nicola Willis has estimated around 900 defence personnel, 200 teachers, 200 police, and 500 health workers are in service tenancies.

The proposed change would let these workers withdraw their KiwiSaver Scheme balance for a first home purchase without having to live in it immediately. They could rent the property out while continuing to live in their employer accommodation.

Farm Purchases Through Companies or Trusts

Most farms in New Zealand are bought through a company or trust rather than in an individual's personal name. KiwiSaver's current first home withdrawal rules only apply to purchases made in a member's own name, which effectively excludes most aspiring farmers from using their balance for a farm purchase.

The proposed change would allow first-time farm buyers to use their KiwiSaver Scheme balance for a farm purchase through a commercial entity they majority own, provided the farm will be their principal place of residence. The standard KiwiSaver first home withdrawal requirements would still apply: the buyer must have been a member for at least three years, and must retain at least $1,000 in their account.

What the Officials Actually Said

The official advice from the Ministry of Business, Innovation and Employment (MBIE), published in a regulatory impact statement, is notable. MBIE recommended the Government retain the status quo. Its analysts were unable to find evidence current KiwiSaver settings had held back farm purchases or stopped workers entering the agricultural sector. MBIE also noted there was no evidence to indicate the scale of the issue for service tenancy workers.

MBIE flagged concerns these changes could set a precedent for further early withdrawals, imposing administrative costs on providers (which may be passed on to members in fees) and gradually widening the gap between KiwiSaver and its core retirement savings purpose. The MBIE advice observed there is no comparable defined contribution retirement scheme internationally allowing early withdrawals for business purchases.

Industry reaction has been cautiously mixed. Several KiwiSaver Scheme providers support the service tenancy fix on fairness grounds but have questioned the broader expansion. The Financial Services Council warned any widening of withdrawal scope could undermine the scheme as a retirement vehicle.

Why This Keeps Happening

You do not have to have been around long to see KiwiSaver go through more tweaks than the iPhone. Governments of all persuasions have adjusted contribution rates, shifted tax treatments, reshuffled default providers, fiddled with incentives, and attempted to add GST to scheme fees (only to be met with public outcry and a rapid back-down in 2022).

The Retirement Commission's 2025 Review of Retirement Income Policies put this bluntly, calling for a cross-party political accord to end piecemeal changes and provide certainty for future generations. Among the 12 recommendations: higher Government contributions for low-income earners, removing exclusions for members over 65 and temporary visa holders, extending the Government contribution during parental leave to $1,000 per period, and trialling sidecar emergency savings accounts alongside KiwiSaver. Whether any of these ideas survive the next electoral cycle is another question entirely.

The structural lesson is simple. Any contribution made to KiwiSaver is subject to political winds, government budget pressures, and whatever policy priorities happen to dominate at the Beehive. With $123 billion now invested across 3.4 million members, KiwiSaver has become a significant target for governments seeking fiscal room. The halving of the Government contribution is unlikely to be the last adjustment.

How New Zealand Compares

Even at 4%, New Zealand's default contribution rate remains modest by international standards. Australia's compulsory employer superannuation contribution stands at 11.5% (rising to 12% from July 2026). The UK's auto-enrolment minimum is 8% (5% employee, 3% employer). Singapore's Central Provident Fund runs significantly higher again.

The gap is not just about contribution rates. Australia's superannuation system taxes employer contributions at a concessional 15%, well below most earners' marginal income tax rates, and withdrawals after age 60 are completely tax-free. KiwiSaver offers neither of these benefits. The practical implication is clear: New Zealanders need to save more voluntarily to reach comparable retirement outcomes.

KiwiSaver Is a Sidecar, Not the Whole Motorcycle

KiwiSaver is a great tool for those who are employed. The employer contributions and compounding returns are hard to beat. But KiwiSaver is far from perfect. It is locked in until you are 65 (with very few exceptions). And as we have just seen, it remains vulnerable to ongoing political tinkering.

KiwiSaver also has several practical limitations worth keeping in mind:

You can only be a member of one scheme at a time, and in most cases you cannot choose your own specific investments within the scheme.
Many New Zealanders believe making minimum payments is enough to fund their later years. According to the FMA's 2025 KiwiSaver Annual Report, the average balance is around $36,300 and 65% of members remain on the minimum contribution rate. For most people, this will not be enough.
Record levels of early withdrawals continue to erode balances. Total withdrawals reached $5.9 billion in the year to March 2025, with financial hardship withdrawals alone jumping over 50%.
30% of working-age members are not contributing at all, up from around 20% in 2010.

Given this steady stream of adjustments, we suggest treating a KiwiSaver Scheme investment like a sidecar on your investment motorcycle. KiwiSaver is handy, useful, even efficient, but you would not want to ride into your financial future relying on it alone.

Diversification does not just mean investing across asset classes. It also means investing across account types and structures, including those where you are the one in control. If all your retirement savings are locked away in a system steered by politicians, you are not really in control.

Focus on What You Can Control

You cannot control what future governments do with KiwiSaver. You cannot predict investment market movements, and you certainly cannot forecast the next policy twist coming out of Parliament. But there are things you can control:

How much you invest: Consider increasing your contribution rate beyond the default. The available rates are 3%, 4%, 6%, 8%, and 10%.
Which scheme you are in: Review your scheme choice. Switching is free and straightforward. Performance varies significantly across providers over time.
Your fund type: Make sure your fund choice (Conservative, Balanced, Growth, Aggressive) matches your age, assets, goals, and time horizon. Many people remain in the default Balanced fund when a different choice would serve them better.
Whether KiwiSaver is enough on its own: This is the one most people overlook. Accessible investments outside KiwiSaver give you flexibility, optionality, and protection from political risk.

Start a Non-KiwiSaver Investment

Build flexibility into your long-term planning. Use investment vehicles you understand and can access when you need them. Your future is too important to outsource entirely to someone else.

Depending on your preferences and situation, this could involve property investment, directly investing in shares, or investing in a managed fund similar to KiwiSaver in structure and tax treatment but without the lock-in. The key difference is simple: you can access your money when you choose, not only when a politician or a piece of legislation says you can.

The Bottom Line: More KiwiSaver Changes

KiwiSaver remains a valuable, straightforward way for most New Zealanders to build long-term savings, particularly with the benefit of employer contributions. But it is not bulletproof either. The latest round of changes makes a stronger case for building wealth beyond a single scheme controlled by whichever government happens to be in office.

Contribute to KiwiSaver. But do not stop there. Give yourself more options, more freedom, and more control over your financial future.

If you are reviewing your contribution rate, considering investments outside KiwiSaver, or simply want to make sure your financial plan accounts for these changes, book a complimentary initial consultation with one of the team at Become Wealth.

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