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You’ve likely seen the headlines—KiwiSaver is getting a shake-up in the 2025 Budget. The default contribution rate will rise from 3% to 4%, phased in gradually over three years.
For those of us in financial services, this is a welcome move. As Retirement Commissioner Jane Wrightson puts it:
“Our findings show that the increase of the default employee and employer contribution settings could result in retirement funds lasting on average approximately 30% longer than under the pre-Budget 2025 settings for median salary and wage earners who contribute without interruption over a 40-year working life.”
However, not all changes are positive. The government’s annual top-up is being halved, and those earning over $180K will no longer be eligible. This could hit the self-employed and unpaid workers hardest—groups that often rely on that contribution.
On the upside, 16- and 17-year-olds can now receive government contributions too, helping to build strong savings habits from a younger age.
The goal? To help New Zealanders grow their retirement or first-home savings while easing the long-term fiscal pressure on the government.
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New Zealand’s pre-budget default contribution rate of 3% (matched by employers) is among the lowest in the OECD. It’s no surprise that many Kiwis fall short of what they’ll need in retirement.
Depending on your lifestyle, location, and living situation, retirement savings targets range from $355K to $1M. That means many of us are underprepared.
Let’s run the numbers using Sorted’s KiwiSaver calculator and some national averages, for our imaginary person "Alex."
For this scenario, we used the average KiwiSaver member’s age (35), salary, balance at age 35, and typical fund type.
That’s a $42K boost—not bad! But still short of the $355K base level needed for a modest retirement in the provinces.
Alex's bumped up their contribution rate on the calculator to 6%, while Alex's employer stayed at 4%.
Yes, it means about $75 less per week in take-home pay for Alex —but it could grow this retirement balance to $303,549. That’s a $100K improvement over the 3% scenario.
Tip: Alex was wise and checked out MoneyHub’s tips for saving on household bills to help offset the difference.
Having already bought a house and at average Kiwi age of 35, Alex has now got time to ride out market fluctuations. Deciding to switch to an Aggressive fund pushed Alex's projected balance to $424,069—an extra $121K.
Important: Aggressive funds come with higher risk. Luckily Alex tried the Sorted Investor Profiler to find out more about investor profiles and sought some advice from a financial adviser before making the switch.
Many Kiwis are in KiwiSaver but don't always understand that with a few smart moves—upping your contribution and choosing a fund that matches your risk appetite—you could be looking at hundreds of thousands more in your KiwiSaver by retirement.
Everyone' situation is different and the above is a generalised example only.
So - as always -before making any changes, it’s always a good idea to speak with a financial adviser.
All the best with your saving Kiwis!
Book a time with one of our friendly financial advisers for a free KiwiSaver consult
This article was written by Shona and peer reviewed by our financial advisory team.
Disclaimer: Shona is not a financial adviser. The above is generalised information using publicly available tools that has been peer-reviewed by the Velocity Financial Advisory team. As always, before you make any financial decisions, discuss your situation with an adviser from Velocity Financial, and seek advice from professionals, such as a lawyer and accountant, to find the best solution for your unique situation.
Always get professional advice
The information shared in this post is meant to be general guide to support you on your journey. When making important decisions about your finances, we encourage you to seek independent financial advice first, tailored to your unique situation. As well as talking with a financial adviser, make sure you talk to your lawyer and accountant too – together they'll help you find the best solution for your specific situation. Our knowledgeable financial advisers are here to help. Check out our website for the details about our financial advisory services in our disclosures: https://www.velocityfinancial.co.nz/disclosure-statement.