The latest KiwiSaver overhaul proposed by the Retirement Commissioner aims to reshape how New Zealanders save for retirement and who benefits most. In this episode, the team breaks down what these KiwiSaver changes mean for low-income earners, parents, over-65s, and anyone trying to build long-term financial security.
Targeted Support for Low-Income Earners
A major part of the proposed KiwiSaver changes focuses on boosting support for those earning less. As the team explains, the government is shifting from a blanket contribution model to a staggered, income-based structure designed to help lower earners build better balances over time.
Michael notes that this change is designed to correct inequality:
“Any time you can make them financially better off in the future – I love it.”
Under the proposal:
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Earn up to $49,000 → for every dollar contributed, the government adds 50 cents, up to $1,000 annually.
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Earn up to $58,000 → 50 cents per dollar, up to $500.
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Earn up to $67,000 → 25 cents per dollar, up to $500.
James highlights how meaningful this can become over time – even an extra $250 per year compounds significantly over a decade.
These KiwiSaver changes are ultimately about improving long-term outcomes for people who historically haven’t been able to contribute as much, whether due to career stage, household responsibilities, or life circumstances.
Parental Leave and Closing the Gender Gap
The team also dives into one of the most widely supported KiwiSaver changes – an automatic $1,000 government contribution for anyone on paid parental leave, regardless of whether they contribute themselves.
James calls it a “tremendous idea”, noting the direct link between time off for childcare and lower retirement balances, particularly for women. Currently, only a fraction of eligible parents make voluntary contributions while on leave – this policy aims to fix that gap.
The change matters because:
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It acknowledges the career break impact on retirement savings.
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It removes the barrier of needing to manually contribute to receive support.
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It ensures parents don’t fall behind during one of life’s most expensive periods.
As James puts it:
“It is going to make a big difference come their retirement.”
These KiwiSaver changes help level the playing field – a key theme running through the Commissioner’s proposals.
Employer Contributions Beyond Age 65
Another proposed shift is extending compulsory employer contributions past age 65, recognising that many New Zealanders are working longer – either by choice or necessity.
James explains that in today’s workforce:
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People are staying employed longer
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Modern medicine means longer working lives
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Some retirees still carry mortgages or lack sufficient savings
Michael adds:
“We know a lot of people who don’t want to stop working at 65.”
For someone earning $60,000 and working to age 68, the continued employer 3% contribution could add over $10,000 to their savings – a meaningful difference in retirement.
The Sidecar Emergency Savings Account - A Divisive Proposal
The most controversial of the proposed KiwiSaver changes is the creation of a sidecar emergency savings account that sits alongside KiwiSaver, allowing limited access to funds in hardship.
Both James and Michael strongly oppose it.
James’ view:
“I don’t like it. I hate it.”
Michael calls it a
“knee-jerk reaction”
to the economic cycle.
Their concerns include:
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It weakens the core purpose of KiwiSaver – long-term, locked-in savings
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It risks creating a slippery slope for further withdrawal reasons
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Short-term access undermines decades of compounding
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It shifts today’s problems into future financial hardship
As Michael warns:
“You’re just kicking the can down the road.”
Both agree that while hardship is real, encouraging withdrawals from retirement savings ultimately leaves people worse off.
Implementation: What’s Actually Likely to Happen
Importantly, the Retirement Commissioner cannot implement these changes alone – political support is essential. James notes that the proposals are only viable if both major parties come on board and the rollout is phased over time.
Michael estimates the likelihood of adoption as:
He also suggests the controversial emergency account may be used as a “negotiation chip” – something politicians can remove to secure support for the more meaningful improvements.
Other proposed changes mentioned include:
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Removing the ability for employers to bundle KiwiSaver into salaries
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Increasing total contribution rates gradually to reach 10%
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Addressing the gap for business owners who currently receive no employer contributions
Key Takeaways
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The proposed KiwiSaver changes prioritise fairness, targeting low-income earners and parents.
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Parental leave contributions are designed to reduce long-term gender gaps in retirement savings.
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Extending employer contributions beyond age 65 reflects shifting work patterns and longer careers.
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The emergency “sidecar” account is widely criticised for undermining long-term savings.
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Political approval is required – and some proposals may be adjusted or dropped.
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Even small annual boosts can significantly compound over time.
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Making an active fund and contribution choice remains essential for long-term outcomes.
Next Steps:
If you want personalised advice on how these KiwiSaver changes could impact your long-term savings, book a free 30-minute KiwiSaver discussion with a Lighthouse adviser.
If you’d like to learn more, check out these other episodes 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.
