THE BIG PICTURE: Why KiwiSaver Is Changing
KiwiSaver is one of New Zealand’s most important long-term savings tools. But with a rapidly aging population and pressure on public finances, the Government’s 2025 Budget introduced a suite of changes designed to strengthen retirement outcomes—and share more of the load with employers and individuals. From increased contribution rates to changes in tax and entitlements, the updates will have a meaningful impact on payroll processes, employment agreements, and even remuneration conversations. If you’re a business owner or HR leader, here’s what you need to know—and do—before these changes kick in.
What’s Changing in KiwiSaver?
1. Higher Default Contribution Rates
When: From 1 April 2026, increasing to 3.5%, then 4% from 1 April 2028
Who it affects: All employees and employers not using custom rates
This phased increase aims to improve retirement savings over time. For employers, it means higher payroll costs, particularly if you currently offer the minimum contribution. Now’s a good time to revisit your Employment Agreements to ensure they reflect these changes accurately.
2. Reduced Government Contributions
When: Effective 1 July 2025
What’s changing: The Government’s matching contribution halves, from 50c to 25c for every $1 an employee contributes—up to $260.72 annually (down from $521.43)
This shift places more emphasis on individual and employer contributions, which may change how employees perceive the value of KiwiSaver. Consider updating your staff internally to ensure employees understand the changes and can plan accordingly.
3. New Employer Tax Thresholds (ESCT)
When: From 1 April 2025
What’s new: Adjusted thresholds mean some employees may pay less tax on employer contributions. For example, the 30% ESCT rate now applies to $64,201–$93,720 (previously lower)
This could offer net benefits to employees in that bracket and may become a talking point during salary reviews.
4. Changes to Total Remuneration Agreements
If you operate on a total remuneration model where KiwiSaver is included in base salary, you’ll need to ensure the rising contribution rates don’t cause pay to fall below the minimum wage. Review your remuneration strategy to ensure fairness, transparency, and compliance.
5. Employer Contributions Extended to Younger Workers
When: From 1 April 2026
What’s new: 16- and 17-year-olds will now receive employer contributions if they join KiwiSaver
This is a win for young workers and a great opportunity for employers to promote financial literacy and early savings habits.
What Employers Should Do Now
Review Employment Agreements
Ensure your contracts reflect the correct KiwiSaver contribution structure and protect both parties under the new rules. This is particularly important if you use total remuneration or offer additional employer contributions.
Update Payroll Systems
Your payroll provider will likely update their software to accommodate new contribution rates and ESCT thresholds. But double-check settings and proactively reach out to your payroll provider if you are unsure.
Communicate with Employees
Be proactive. Let your people know what’s changing, when, and why. Employees may have questions about how this impacts their take-home pay and long-term savings.
Final Thoughts
The KiwiSaver updates present both challenges and opportunities for NZ businesses. Yes, they require some upfront work, but they’re also a chance to reinforce your commitment to your employees’ future.
