Kristian James, Head of Distribution at Generate, breaks down what the latest 2025 Budget changes could mean for KiwiSaver members.
How do you think the lower government contribution will impact KiwiSaver members?
Analysis from the Retirement Commission found the contribution change should increase retirement savings for around 80% of contributing KiwiSaver members.
We recognise that there may be some who rely heavily on government contributions –such as self-employed individuals and low-income earners – who will see a decrease in their retirement savings.
Despite the decrease in Government contributions, the Retirement Commission says most KiwiSaver savings should last 30% longer.
This is due to higher employer and employee contributions. The default contribution rate for both employees and employers will increase to 3.5% in 2026 and 4% in 2028, which could help balance out the lower government contribution.
Do you think the budget changes to KiwiSaver will discourage young people from getting involved in the scheme?
It’s still an incentive to save and we know that Kiwis benefit from saving and investing, and it’s about forming habits.
Investing in KiwiSaver is to get into a first home or have the retirement you deserve, and those things are worth aiming for.
Extending contributions to 16- and 17-year-olds is great – they are engaged younger and benefit younger.
How will increasing the base contribution rate from 3-4% impact KiwiSaver members?
It will lift their retirement savings, meaning they should be better off in retirement.
Using the Sorted website’s comparative calculator, you can see that with the Government’s KiwiSaver changes an 18-year-old today earning $48,000 a year, and investing in a balanced fund, will have almost $900,000 in their KiwiSaver account at age 65. Under the old settings, it would have been about $721,000.
For a 35-year-old on an average salary of $80,000, the change in contribution from 3% to 4% could result in a 25% higher KiwiSaver retirement balance at age 65.
What do you think about the decision to introduce government contributions for 16- and 17-year-olds?
It’s great! This adds up over time, and starting early encourages savings early. It means that you get into the savings and investing habit.
It will mean people actively engaging with KiwiSaver earlier, thinking about who their KiwiSaver provider is and what they expect from their KiwiSaver provider. They’ll be looking for great long-term returns after fees, the importance of excellent service, and seeking KiwiSaver providers like Generate who can educate you and empower you with your KiwiSaver savings.
Could the government be doing more to help people invest?
Absolutely! In future, NZ Super will be under strain as we age and living longer. We need to look at increasing this further. New Zealand's current default minimum employee and employer contribution of 3% is among the lowest in the OECD. A 4% employee and 4% employer at 8% total is a positive first step. We see we need to progress to a combined contribution goal of 10% by 2037 – the 30th anniversary of KiwiSaver.
In summary
The more you can invest in your KiwiSaver account, the better off you will be and the greater financial freedom you can have.
At Generate we see the 2025 Budget changes to KiwiSaver as a positive and support the changes. We believe that Kiwis will get the most out of the changes if they are educated and empowered to choose the right fund that is right for them, and right for their goals – which is best done through good advice.