The latest KiwiSaver changes are set to gradually increase contribution rates for New Zealand workers. While the increase may appear small, over a lifetime these KiwiSaver changes could add around $100,000 to a retirement balance, depending on income and investment settings.
What the KiwiSaver Changes Actually Are
The core KiwiSaver changes focus on increasing minimum contribution rates over time.
Currently, both employees and employers contribute a minimum of 3% of salary to KiwiSaver. From 1 April, that minimum contribution will increase to 3.5%, before rising again to 4% the following year.
This means total minimum contributions will move from 6% of salary to 7%, combining both employer and employee contributions.
Although these increases may seem minor, the intent is to gradually lift retirement savings levels in New Zealand. Over time, policymakers have also discussed aligning more closely with retirement systems such as Australia’s, where retirement contribution rates are significantly higher.
How the KiwiSaver Changes Could Add $100,000 to Retirement
One of the most significant impacts of these KiwiSaver changes is the potential effect on retirement balances.
Using projections from the Sorted KiwiSaver calculator, someone who starts saving at age 20 and earns $80,000 per year while contributing the minimum could accumulate roughly $475,000 by age 65 in a balanced fund (in today’s dollars).
Without the contribution increases, that balance may have been closer to $375,000, meaning the KiwiSaver changes could add around $100,000 to retirement savings over time.
This highlights the power of small contribution increases when they compound over several decades.
However, the discussion also highlights that KiwiSaver alone is unlikely to be enough for retirement, meaning many people will still need additional savings or investments alongside it.
Making the Most of Your KiwiSaver Contributions
One of the biggest issues with KiwiSaver is that many people set it up once and rarely review it again.
When someone joins KiwiSaver without choosing a provider, they are typically assigned to a default provider and placed into a balanced fund automatically.
This system ensures people begin saving, but it also means many investors remain in the same fund for years without reassessing whether it suits their goals.
Because KiwiSaver funds are locked away until retirement, the conversation emphasises the importance of actively reviewing where the money is invested and whether the risk level matches long-term goals.
For example, after using KiwiSaver for a first home deposit, many people forget to review their fund settings – even though they may still have decades before retirement.
Should You Contribute More Than the Minimum?
Another question raised in the discussion is whether people should increase their KiwiSaver contributions beyond the minimum.
One approach discussed is focusing on maximising employer and government contributions, as these represent additional money going into the account.
However, the conversation also highlights that contributing significantly more than the minimum can reduce flexibility. Because KiwiSaver funds are generally locked away until age 65, putting too much money into the scheme could limit access to funds earlier in life.
Instead, many people may choose to:
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Contribute enough to capture employer contributions
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Receive any government incentives available
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Invest additional savings outside KiwiSaver for greater flexibility
This approach allows investors to build retirement savings while still maintaining access to funds if needed.
Using KiwiSaver to Buy a First Home
KiwiSaver can also be used toward a first home deposit, which raises an important strategic question. For younger buyers, using KiwiSaver to purchase property can make sense – particularly when it reduces long-term housing costs such as rent.
However, the discussion suggests that people considering this later in life should carefully assess whether it fits their overall retirement strategy. For example, if someone withdraws a large portion of KiwiSaver close to retirement, they may not have enough time to rebuild those savings before leaving the workforce.
This is why many people benefit from reviewing the numbers carefully before making decisions about using KiwiSaver for property.
Key Takeaways
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Minimum KiwiSaver contributions will increase from 3% to 3.5%, then to 4% in the following year.
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Total combined contributions will increase from 6% to 7% of salary.
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Small increases in contributions can significantly impact retirement balances due to compounding.
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In one example, contribution changes could increase retirement savings by around $100,000.
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KiwiSaver alone is unlikely to fully fund retirement for most people.
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Many people are automatically placed into default providers and balanced funds if they do not actively choose.
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Reviewing your KiwiSaver fund regularly is important, especially after using it for a first home deposit.
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Contributing the minimum to capture employer and government contributions is often a starting point, with additional savings potentially invested elsewhere for flexibility.
Next Steps
If you’re unsure whether your KiwiSaver fund, contribution rate or provider is right for you, the team at Lighthouse Financial can review your KiwiSaver and help ensure your money is working as efficiently as possible at no cost to you.
If you’d like to watch more, check out this other episode below.
For a no obligation discussion to see how we can help you on the path to wealth, please contact us.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
