Big changes have been announced to KiwiSaver recently and we want to ensure you’re all across it. To recap what has been announced:
- The default contribution rate will be increased from 3% to 4% by April 2028 for both employees and employers. This will be changed in a phased approach, building up to 3.5% by 2026, then 4% by 2028.
- The Government contribution will be removed for KiwiSaver members with taxable income over $180,000.
- For those earning below the pre-tax $180,000 threshold, the Government contribution will be halved – from $521.43 to $260.72.
- The change in Government contributions will take effect from 1st July 2025, which means you still have the opportunity to ensure you receive the full amount of $521.42 for this year. To do so, make sure to contribute $1,043 to your KiwiSaver investment by June 30th, 2025.
- 16-17 year olds are now eligible for the Government contributions.
What does this mean for you?
For Kiwis earning below the $180k pre-tax threshold, going from $521.43 to $260.72 annually ends up being $5 less hitting your retirement account each week. A small pinch for self-employed, but for those employed, the $260.72 loss in contributions may be offset by the increase in employer contributions for those who earn $60,000 – $179,000.
If your finances are already stretched and you’re concerned about the affordability of the extra 1% taken from your pay, there will still be the option to opt out of the new 4% default contribution rate (and continue contributing at 3%) when it fully comes into effect in 2028. But you will need to review the following year and request to opt out again if want to continue at 3%.
The main conclusion to draw from this change is to understand that funding your retirement should be taken into your own hands with a focus on what you can control, rather than government support.
Below are some things you can do to ensure you have enough savings to retire well:
- Review your KiwiSaver annually
Government contributions have been helpful to a point, but it’s never been enough to rely on solely to fund your retirement. Ensuring your KiwiSaver investment is in the appropriate fund for your risk tolerance and timeline will have more of an impact than any government support will.
You can book your free review here.
- Diversify your retirement savings with other investments
KiwiSaver is a great tool to kickstart your savings, however even with a boost in contribution rates, it may not be enough to fund a comfortable retirement. So, it needs to be treated as a piece to the retirement savings puzzle.
Understand which investment options can help you reach your retirement savings goal in the timeframe you need to achieve it by. You can invest in managed funds that are outside of KiwiSaver (which gives you flexibility to access your funds sooner) or use the power of leverage through property investing. Whatever option you decide on, seek professional advice from a trusted expert.
- Prioritise paying down debt
Whether you have short-term debt (like car loans, credit cards or buy now pay later), or a mortgage to pay off, you do not want to be servicing this extra expense when the time comes to stop working.
Ensure you have a plan to pay off your debt as fast as you can. Doing so will help you free up additional cash from the savings made on interest payments that can be put to better use or at least reduce the pressure of maintaining these repayments at retirement age.
enable.me have a team of financial coaches and strategists at the ready to support you on your debt-free journey which you can view here.
Take control of your own financial future
The economic climate has been tough on Kiwis. But while it’s harder to get ahead for many, it doesn’t mean it’s impossible. With a bit of creativity and focusing on the things you can control; you can still have a profound impact on your financial future.
If you find yourself stuck in freeze mode, overwhelmed by the choices and information hurled your way, take a step back and start with a small action that is easy to implement today.
When you’re ready to make a bold financial move, reach out to our team of Financial Advisers.
Your AdviceFirst team can help you make the most of your KiwiSaver investment, build a wealth portfolio or protect what matters most through insurance.
To find out more, call us on 0800 438 238, email letstalk@advicefirst.co.nz, or book a financial review here.
Disclaimer: This blog is for informational purposes only and does not constitute individual financial advice.
