What Changes Have Been Made to KiwiSaver?

More KiwiSaver changes have just been made, here’s what you should do about them

Just when you thought KiwiSaver was the one part of your financial life you could ignore for a while, along comes a fresh round of tweaks. This is nothing new, changes have been made routinely since KiwiSaver started.

This time, some changes are for the better, while some are clearly for the worse. Let’s take a closer look and see what you can do in response.

What KiwiSaver Changes Have Occurred?

Several things:

1. Reduced Government Contribution: The Government is halving the money it pays to KiwiSaver and will stop paying anything for people earning above $180,000 per year. This change, which was confirmed in the Budget, will take effect from July. This means the maximum annual government contribution will be reduced to $260.72. The KiwiSaver changes are expected to save taxpayers up to $3 billion over the next four years.
2. Contribution Rate Increases: The current minimum KiwiSaver contribution is 3% each from the employee and employer. This will increase to 3.5% each in April 2026. Finally, the contribution rate will reach 4% each from both the employee and employer in April 2028. The increase is being introduced in two parts, spread over three years, to allow people to prepare for the extra costs involved. In the long term, this will increase the retirement savings of KiwiSaver members, but it will mean they’ll notice a small drop in their take-home pay as a consequence.
3. Currently, 16- and 17-year-olds can join KiwiSaver only by applying with the support of a parent or guardian directly to a KiwiSaver provider. And while they can make payments, they don’t receive any government or employer contributions. This is set to change. From next July, 16- and 17-year-olds will be eligible for the annual government contribution of $260.72. And from April 2026, they’ll receive employer contributions, too.

You might look at the list above and think there’s mixed signals. On the one hand, more is being invested in the Scheme, while on the other, benefits are being removed. Why the mixed signals? Well, it’s probably just another day in the life of a system that’s politically useful, frequently misunderstood, and adjusted about as often as a teenager’s Spotify playlist.

KiwiSaver Changes Are Inevitable

You don’t have to have been around long to see KiwiSaver go through more tweaks than the iPhone. Governments of all inclinations love to tinker with it: adjusting contribution rates, shifting tax treatments, playing musical chairs with default providers, playing with incentives, and so on.

Some of the latest changes aren’t inherently bad. In fact, allowing younger members to join and share in the benefits is great.

Higher contribution rates will mean more growth over time. But there’s several major issues with the latest changes:

• Halving the Government contribution slashes one of KiwiSaver’s key tax advantages, effectively halving the incentive that made it an appealing long-term savings vehicle in the first place. For many members, that $521.43 annual top-up wasn’t just a nice bonus, it was a meaningful part of their long-term compound growth. This also puts New Zealand even further out of step with comparable retirement savings schemes overseas, nearly all of which offer significantly more generous tax breaks or matching contributions. While it’s not the end of KiwiSaver, it is a clear reminder not to lock up all your hard-earning investments without good reason, for example, you need to prevent yourself from accessing them!
• As a nation, the contribution rates remain low compared with overseas alternatives. Consider Australia where the compulsory employer contribution rate is about to lift to 12%. So, we’re still a long way behind our trans-Tasman friends when it comes to saving for comfortable retirement lifestyles.
• Removal of the Government contribution for those earning over $180,000 will lead many to re-evaluate their investment decisions. Sure, $180,000 sounds like a lot of money each year, but if you’re single and living in an expensive area like Auckland you might not feel that way!

But the bigger lesson here is how any investment contribution made to KiwiSaver is subject to political winds, government budget balances, and whatever economic philosophy happens to be trending in Parliament that week.

KiwiSaver is a Sidecar, Not the Whole Motorcycle

KiwiSaver is a great tool for those who are employed. The Employer Contributions and Government top-ups are hard to beat. But KiwiSaver is far from perfect. For starters, it’s locked in until you’re 65 (with very few exceptions). And more importantly, it’s vulnerable to ongoing political tinkering, as we’ve just seen. KiwiSaver has several other drawbacks, too:

1. You can only be a member of one scheme at a time, and in most cases, you can’t choose your own specific investments.
2. Many New Zealanders think making minimum payments to KiwiSaver is enough to fund their later years, chances are these people are mistaken.

As steady stream of meddling has occurred with KiwiSaver since it began over a decade ago, we suggest treating a KiwiSaver investment like a sidecar on your investment motorcycle. KiwiSaver is handy, useful, even efficient, but you wouldn’t want to ride into your financial future relying on it alone.

Diversification is a well-used buzz-word in investment circles. The term doesn’t just mean investing across asset classes. Diversification also means investing across account types and structures, including those where you’re the one in control.

If all your retirement savings are locked away in a system that the government is steering, then you’re not really in control. And if you’re relying on KiwiSaver to deliver all your future financial needs, you might find yourself living on two-minute noodles in retirement.

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Focus on What You Can Control

This is where your approach comes in.

• You can’t control what future governments do with KiwiSaver.
• You can’t predict investment market movements.
• You can’t control the actions of other people.
• You can’t influence the economy.
• You can’t forecast the next recession, natural disaster, war, or trade war. Heck, even the MetService can barely forecast the weather seven days in advance!

But you can control things including:

• How much you invest.
• What you invest into.
• Whether you have an investment strategy.

Rather than getting caught up in every KiwiSaver update from each successive government, take the time to build a personal financial strategy that extends beyond it.

Start a Non-KiwiSaver Investment

Build flexibility into your long-term planning. Use investment vehicles that you understand and control. And always remember: your future is too important to outsource entirely to someone else, especially a politician!

Depending on you and your preferences or situation, this could involve any number of approaches. Maybe it’s property investment, perhaps directly investing in shares, or possibly investing in something very similar to KiwiSaver which is unlocked – an accessible managed fund.

KiwiSaver Isn’t Broken, But It’s Not Bulletproof

Let’s be clear: we’re not anti-KiwiSaver. It’s a good thing. But it’s not the only thing. Like any good tool, it works best when it’s used for what it was designed for, and when it’s used alongside other tools.

Consider this: KiwiSaver’s “set and forget” nature means it’s simple for anyone to be an investor. If you are employed, your contributions come out of your pay before you see them (which also helps you invest by dollar-cost averaging).

So, contribute to KiwiSaver. But don’t stop there. Give yourself more options, more freedom, and more control. Don’t leave your financial plans or retirement to political consistency.

The Bottom Line: KiwiSaver Changes

KiwiSaver rules have just changed, again. And they’ll probably change again in a few years. So rather than obsess over what you can’t control, start acting on what you can.

If you don’t already have a non-KiwiSaver investment fund, start one. It’s that simple. Build a long-term investment plan with flexibility. Set goals. Take ownership.

At Become Wealth, every day we help people like you build financial freedom in a robust, flexible, way. If you’d like to find out how, book your complimentary initial consultation with one of our professionals.