Insights
Budget 2025 KiwiSaver changes: what you need to know + what we’d like to say

START: If you missed the details, here’s a run down from Radio New Zealand:

The fact employer and employee minimum contributions will increase to 4% (up from 3%) over 3 years is a huge plus because it’s great for long term saving. The fact it is stepped, and has a temporary opt out, should help with planning and affordability for both KiwiSaver members and companies. Also, extending contributions to 16- and 17-year-olds will help build savings habits for younger people – and if they are earning and paying tax at 16 or 17 it’s only fair they get the matching employer contribution.

As a way of understanding why an increase from 3% to 4% is a good thing - think about where Australia is at with their contribution rate. Their current minimum contribution rate is 11.5% and consequentially the average balance for Australians aged between 40-45 years old is $233,300 for men and $153,200 for women* (don't get us started on the size of that gap). That’s compared to Kiwis in the same age bracket who have an average balance of between $30,000 to $40,000 **.
Clearly our Australian neighbours are going to be retiring with a higher average balance than us and this increase is helping us catch up.

* https://www.australiansuper.com/campaigns/average-balance-planners
** https://www.moneyhub.co.nz/average-kiwisaver-balance-by-age.html

Incentives only work if there’s a reward worth the effort of engaging.

We know many people struggle to find motivation to save for something far in the future. We also know people with less discretionary income find it hard to carve off anything to save at all.

The original dollar-for-dollar government matching to $1,042 in 2007 brought real engagement because it inspired people to invest in themselves. If you could get your part together, it would be matched. Then it was halved in 2012, now it’s halved again, from $1, to 50 cents and now 25 cents for every $1 you contribute, up to a reduced maximum amount of $260.72. For lower incomes and people not earning, the incentive has been eroded, and we are worried this will also erode people’s interest in saving.

Those who aren’t earning or are self-employed won’t receive the new 4% employer base contribution, meaning there’s also no counterbalance mitigating the impact.

If you’re worried about how this is going to affect the amount you can save for a first home or retirement, we recommend talking to a financial adviser. Financial advisers can help you plan for the goals in your life that involve money; think retirement, buying a home or growing your wealth. A financial adviser can help you feel empowered and excited about your future; they can take away uncertainty by replacing it with strategy. Learn more about financial advisers here.

The KiwiSaver Act aims to enhance individual wellbeing and financial independence; at Pathfinder we know that one is often related to the other. Wellbeing diminishes if you can’t meet basic needs. We are heartened by the increase in base contribution rate to 4% and believe this will support more Kiwis retiring with more choices.
But for those most impacted by the reduction in government contributions we’re concerned their drive to save will be lower and their final savings figure will be too.

We’re concerned about the disproportionate impact this decision will have on low-income earners and self-employed. It is likely to be felt most by women. Over 60% of our members are women and we know they’re already retiring with a savings deficit compared to men. We echo the sentiment shared by the Retirement Commission that the savings made from reducing the government contributions could have been reinvested in serving groups with the widest retirement savings gap.

If you’re worried about how this is going to affect the amount you can save for a first home or retirement, we recommend talking to a financial adviser. You can check out the FMA’s guidance on how to find one here.

The government is introducing the $180,000 threshold for receiving the government contribution. We believe it would be beneficial if they use this (or even higher) as a threshold below which employer contributions cannot come out of a worker’s salary. To us it feels deeply unfair if employer contribution rates increase to 4% and the employee has to pay for it. Make sure you ask your employer how your KiwiSaver contribution is funded– is it being covered by them on top of your salary, or is it coming out of your salary?

There are quite a few changes here that will affect different people, differently. That’s why we’re recommending our members speak with a financial adviser.

They can get into the details of your personal situation. Their onboarding process involves understanding you – what you value, your financial situation, your family situation – and they can support you with plans for how to achieve your goals.

Through good financial advice, you will have clarity on how these changes specifically impact you. You will gain insight on whether you’ll have enough to retire with and what you could do to fill a shortfall. You might feel more in control and clear on what you’re working towards.

We’re keen on financial advice because we’ve seen them inspire people, comfort people, straight-talk people, help people. If you need some inspiration, comfort or help – consider contacting a financial adviser.

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Pathfinder Asset Management Limited is the issuer of the Pathfinder KiwiSaver Plan and Pathfinder Investment Funds. A Product Disclosure Statement for the offer is available at pathfinder.kiwi. Learn more about how we invest ethically by reading our Ethical Investment Policy on our website. We encourage all investors to receive financial advice before making their investment decision. This document is for information purpose only and does not constitute a recommendation and should not be taken as a recommendation of any course of action.

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