The Government announced major changes to the KiwiSaver scheme as part of its 2025 Budget. It indicates that these should increase private retirement savings and ensure the long-term financial stability of the scheme. However, they raise a range of issues for employers, who must carefully consider their impact on employee remuneration packages. 

What changes are going to be made to KiwiSaver?

• From 1 April 2026, the default employee and employer contribution rate will increase from 3% to 3.5%. On 1 April 2028, this rate will increase to 4%.
• KiwiSaver members can apply to Inland Revenue for a temporary reduction of their contribution rate to 3%.
• The Government contribution will be removed for all KiwiSaver members with taxable income over NZ $180,000 per annum.
• The rate of Government contribution will be halved to 25 cents per dollar contributed by a KiwiSaver member, with a maximum of NZ $260.72.
• The KiwiSaver scheme will be extended, meaning 16 and 17-year-olds will be eligible for Government and employer contributions. However, 16 and 17-year-olds will need to opt in. Automatic enrolment will remain set at 18-years-old.

What do employers need to think about?

All employers will need to address the financial impact of an increased contribution rate, and manage that alongside normal remuneration reviews, taking into account the cashflow issues for employees.

Employers who provide employees with total remuneration packages, inclusive of KiwiSaver, must weigh how best to manage the increase in the default contribution rate. The considerations are legal, financial and practical when it comes to maintaining employee goodwill. There may be special issues for those employers already offering a higher employer contribution rate to employees. 

Early planning will be crucial to ensure businesses are ready with an appropriate strategy to fund the contributions while sustaining employee engagement.