PHOTO: New Zealand’s 2025 Budget.
In a significant shake-up announced in New Zealand’s 2025 Budget, the government has introduced major changes to the KiwiSaver scheme, impacting contributions and eligibility. Here’s a breakdown of what these changes mean for you and how to navigate them.
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📉 Key Changes to KiwiSaver
1. Government Contribution Halved
Starting 1 July 2025, the government’s annual contribution to KiwiSaver will be reduced from 50 cents to 25 cents for every dollar you contribute, up to a maximum of $260.72. This is a significant decrease from the previous maximum of $521.43.
2. High-Income Earners Excluded
Individuals earning over $180,000 annually will no longer be eligible for the government contribution. This change aims to make the scheme more fiscally sustainable.
3. Increased Contribution Rates
Default contribution rates for both employees and employers will increase from 3% to 3.5% on 1 April 2026, and then to 4% on 1 April 2028. However, members can apply to maintain their contribution at 3% for up to 12 months at a time.
4. Extended Eligibility for Young Workers
From 1 July 2025, 16- and 17-year-olds will be eligible for government contributions, and from 1 April 2026, employers will be required to make contributions for these young workers.
💡 What Should You Do Now?
✅ Review Your Contribution Strategy
With the government’s contribution halved, it’s essential to reassess your savings plan. Consider increasing your personal contributions to compensate for the reduced government input.
🧾 Understand Employer Contributions
Employers will match employee contributions up to the default rate. If you choose to maintain a 3% contribution, your employer will match that rate.
👥 Self-Employed Considerations
Self-employed individuals, who don’t receive employer contributions, should evaluate the benefits of continuing with KiwiSaver, especially in light of the reduced government contribution.
📈 Long-Term Planning
Despite the reduced government contribution, the increased default contribution rates are expected to lead to higher KiwiSaver balances over time, benefiting long-term retirement savings.
🔍 Expert Insights
In a special live episode of Making Cents, financial experts Hannah McQueen (Enable.Me), Ron Montgomery (BlackRock), and Aaron Klee (AMP) discussed the implications of the 2025 Budget on KiwiSaver and personal finances. They emphasized the importance of proactive financial planning and adapting to the new changes to ensure long-term financial security.
🔑 Final Thoughts
The 2025 Budget brings significant changes to KiwiSaver, aiming to make the scheme more sustainable while encouraging increased personal savings. It’s crucial to understand these changes and adjust your financial strategies accordingly to secure your retirement goals.