KiwiSaver

The Government is increasing contribution rates to KiwiSaver, but at the same time reducing, and in some cases, removing the member tax credit.

Key Points:

• Eligibility Extended to 16- and 17-year-olds:
• KiwiSaver Government contributions and employer matching will now be extended to 16- and 17-year-olds. ​
• Default Contribution Rate Increases from 3% to 4% by April 2028. ​
• Government contribution will be removed for KiwiSaver members with taxable income over $180,000 per annum. ​
• The rate of the Government contribution will be halved from $521 to $260.72. ​

The Government has announced in the Budget that the default contribution rate of employee and matching employer KiwiSaver contributions will rise from 3 to 4% of salary and wages, phased in over three years.

However, members will have the choice of remaining on the 3% rate if they choose.

In a move to save the Government money it has announced that the annual Government contribution rate will halve from $521 a year to $260.72.

However, for those earning more than $180,000 a year the contribution will go altogether.

Finance Minister Nicola Willis says the change has been made to ensure the scheme’s costs to the taxpayer remain sustainable.

The KiwiSaver changes are expected to save the Government up to $3 billion over the next four years.

On the positive side the Government has extended the Government contribution, and employer matching, to 16 and 17-year-olds in the workforce. 

Willis says; “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.

The new 4% default rate will be introduced in two steps. From April 1, 2026 it will go to 3.5% and, from April 1, 2028 it will go to 4%.

Phasing in the increases will help workers and employers plan ahead, she says.

“The Government recognises there will be times when some people do not feel able to contribute a higher proportion of their wages and salaries to KiwiSaver. Therefore, employees will be able to opt to contribute at a lower 3% rate and have that that lower rate matched by their employer. Their contributions will be reset to the default rate after 12 months, but they can opt down again if they wish.

Changes to the government contribution will take effect from July 1 this year. "The changes will not affect the government contribution for the current year, which will be paid out in July and August this year."

Boutique providers have taken out the top spots in Consumer New Zealand’s KiwiSaver survey with Generate awarded People’s Choice.

Boutique providers have taken out the top spots in Consumer New Zealand’s KiwiSaver survey with Generate awarded People’s Choice.

Receiving a satisfaction rating of 80% Generate topped the survey, with customers liking the manager’s ease of access and features of its digital platform.

Milford Asset Management comes in second with 75%. Customers cited strong communication and their confidence in returns as reasons they are happy with their provider. Simplicity rounds out the top three with a 69% satisfaction rating from customers, recognised for its fair fees and ethical focus, the survey finds.

At the other end of the scale, both in size and satisfaction rating, New Zealand’s largest KiwiSaver provider, ANZ, has seen satisfaction fall once again with consistently poor performance on transparency and fees, according to the survey.

The bank comes in 11th out of 13 providers ahead of only Smart and Mercer. The survey finds Smart struggles to engage with and support customers, while Mercer customers shared concerns about the quality of the service and value for money.

KiwiSaver providers must work to maintain trust

Consumer New Zealand says while customers’ satisfaction in their provider is growing, the coming years will be a test of how well providers communicate, amid ongoing global economic uncertainty.

“KiwiSaver customer satisfaction has improved noticeably in 2025,” says Jon Duffy, Consumer New Zealand chief executive.

“The sector’s overall satisfaction rating climbed to 57%, up from 52% in 2024.”

Performance is still the key driver of how satisfied customers are, the survey finds, with recent positive returns behind low switching rates. Customers are still worried about whether they are being charged fair fees, how accessible a KiwiSaver provider’s product is and transparency around where their savings are being invested.

“Ethical investment continues to attract high interest. Many New Zealanders say they care about whether their funds are invested in undesirable sectors, but few know the details of where their money goes,” says Duffy. 

“Many rely on trust in their provider. Around 40–50% believe providers are making genuine efforts to invest ethically, while a similar proportion remains unsure.”

Milford Asset Management’s KiwiSaver funds enjoyed a better performance than all other KiwiSaver funds in the March quarter but returns were generally poor, the latest Melville Jessup Weaver survey shows.

Milford Asset Management’s KiwiSaver funds enjoyed a better performance than all other KiwiSaver funds in the March quarter but returns were generally poor, the latest Melville Jessup Weaver survey shows.

ANZ enjoyed a rare quarter with its growth and balanced KiwiSaver funds second-best performers for the quarter after spending long periods languishing at or near the bottom of the performance tables.

Milford’s $6.53 billion growth fund was the best performer in that category but still produced a negative 0.2% return for the quarter while the median return for all 15 growth funds was negative 2.8%.

Milford’s growth fund was sixth best performer over one year but best over three, five and 10 years.

“Predictably enough, investors with higher policy weights to growth assets will have had a disappointing quarter,” said MJW’s William Nelson.

“Most of the funds in this group still have a respectable allocation to global bonds (median 9.3%) which helped to dull the pain of their share portfolios,” Nelson said.

“Many of the more conservative KiwiSaver funds managed to avoid losses this quarter entirely,” he said.

The median return from balance funds, which have between 50% and 65% in growth assets, was still negative 1.7%, as was the return from moderate funds, those with 30% to 49% in growth assets, which was negative 0.8%.

But the median conservative fund, those with between 15% and 29% in growth assets, eeked out a positive 0.1% return.

Milford’s balanced, moderate and conservative funds were the best performers in their categories with a positive 0.3% return, positive 0.6% and positive 1.3% respectively for the quarter.

ANZ’s almost $5 billion growth fund was the second best performer with a negative 2.2% return, though it was still second-last performer over the year ended March with a 2.8% return compared with the median 5.9%.

ANZ’s $3.59 billion balanced fund also ranked second in the quarter with a negative 1% return but was 15th out of the 16 balanced funds for the year and the worst performer over three, five and 10 years.

Generate’s $674 million moderate fund was the worst performer in that category for the quarter with a negative 2.1% return but it was eighth over the year with a 5.4% return, just shy of the median.

The worst performing growth fund in the quarter was Generate’s $1.8 billion fund with a negative 4.3% return but it was ninth over the year, second over both three years and 10 years.

Booster’s $383 million balanced fund was the worst performer in that category in the quarter with a negative 2.4% return and it ranked 12th over the year, 10th over three years, 13th over five years, but fourth over 10 years.

Booster’s $51 million conservative fund was the worst performer out of 18 funds with a negative 0.3% return and it was second last in the year with a 4.6% return.

ANZ’s $1.49 billion conservative fund was the fifth best performer in the quarter but the worst for the year with a 4% return.

There remains no real incentive for clients to direct extra contributions into KiwiSaver, so long as New Zealand is still a global outlier in its choice of tax structure around retirement savings, according to one financial advisory firm leader.

There remains no real incentive for clients to direct extra contributions into KiwiSaver, so long as New Zealand is still a global outlier in its choice of tax structure around retirement savings, according to one financial advisory firm leader.

With the government in the early stages of considering what the future of KiwiSaver looks like, and whether that means higher minimum contribution rates, tax seems to be the elephant in the room few are talking about, says Become Wealth Chief Executive Joseph Darby.

“When you're at peak earning capacity, you're getting taxed at 33% and 39% and then the investment returns are getting hammered, that's the 28%, so you're kind of stunting the growth.”

“I think that’s a bit of travesty in some ways.” 

New Zealand’s TTE (Taxed, Taxed, Exempt) structure around KiwiSaver, where contributions are pulled from taxed income, investment earnings are taxed, and withdrawals at retirement are generally tax-free, differs from the likes of the UK, US, Canada and to a large degree, Australia, where retirement savings are EET (Exempt, Exempt, Taxed) or at least have significant tax advantages.

Joseph Darby says KiwiSaver needs an overhaul, and as part of the process, the government should consider reversing the tax structure to make it more comparable with the international standard.

“I mean, what's the tax benefit? $521 a year? Most people, over a lifetime, that's going to add up to nothing. It's not going to make any material difference.”

The lack of a tax-exempt threshold for contributions has an effect on the nature of advice the firm offers clients.

“If you won a million bucks today, would you put it in KiwiSaver? No, because it’s illiquid and you don’t get a decent premium for that illiquidity.”

“In other countries, you see a financial advisor, they'll always say, you max out your retirement accounts first and then start looking at something else, whereas we'll just say, look at, in most cases, somewhere else that's actually liquid that you can get if you want to start a business or, buy another property, or buy a bach, or do something else when life changes.”