KiwiSaver change coming

From 1 April 2026, the lowest allowable KiwiSaver Contribution Rate is increasing from 3% to 3.5%, and raising to 4% on 1 April 2028.

The new rate is compulsory for employers, and the lowest default rate that employees can pick.

However, employees can apply for a temporary rate reduction from 1 Feb 2026 to continue contributing a 3% from 1 April.

“This could be because you can’t afford the rate increase or want to save in other ways,” said written IRD guidance.

“You can apply for a temporary rate reduction for a three-month (92 days) to 12-month period. You can apply for the rate reduction as many times as you like.”

Employers can choose to match any temporary rate reduction.

KiwiSaver for younger workers

Additionally, 16- and 17-year-olds now qualify for employer KiwiSaver contributions from 1 April 2026, as long as they meet other eligibility criteria.

Finance Minister Nicola Willis said the move was designed to lift savings and provide greater security for Kiwis.

“Most New Zealanders have already embraced KiwiSaver as a simple way of accumulating savings to supplement their income in retirement,” she said.

“The Budget’s KiwiSaver package is designed to encourage them to save more so they can look forward to greater levels of financial security.”

Additionally, the Government is halving the annual government contribution to 25 cents for each dollar a member contributes every year, up to a maximum of $260.72 – and KiwiSaver members with an income of more than $180,000 will no longer receive the contribution.

“Putting these changes together, the KiwiSaver balances of employees contributing at the new 4% default rate will grow faster than they do at the current 3% default rate, providing a larger balance at age 65 and a larger deposit when people use KiwiSaver to buy their first home,” added Willis.

An increase in KiwiSaver balances grows the pool of funds available for investment in New Zealand, which Willis said helps create positive economic outcomes for all.

“That’s good for the economy, and a strong economy ensures a better future for all New Zealanders – including young people.”

Unforeseen implications?

Kelly Eckhold, Westpac Chief Economist, told RNZ that an increase in mandatory KiwiSaver contributions could lead to lower pay rises for employees.

“In the end, employers will pay a total level of remuneration in line with prevailing supply and demand trends in the market. Changing the allocation of what employees do with that remuneration is not likely to change that assessment. Having said this, it will be impossible to know the counterfactual as we can only observe what employees are paid as opposed to what they might have been paid.”