Budget 2025 KiwiSaver changes a good start, but bigger opportunity missed

Budget 2025’s KiwiSaver changes will deliver bigger balances at age 65 for most people but highlight how much more impact could be made if the changes went a bit further, says KiwiSaver provider Booster.

The phasing in of both employee and employer minimum contribution rates on salaries from 3% to 4% mean that the average Kiwi will be approximately $62,000 better off at 65 years of age*.

This calculation includes the Budget’s halving of the yearly maximum government contribution.

Booster Chief Executive Di Papadopoulos says the value of KiwiSaver grows with higher contributions over a long period of time.

“While it’s a good start to increase KiwiSaver contributions, it’s clear that there is a much bigger opportunity to be had if both employees’ and employers’ contributions were doubled to where Australia’s is about to go; 6% from both employees and employers.,” says Papadopoulos.

“This would deliver to that same Kiwi, an extra $220,000 instead of an extra $62,000 at age 65. So, it illustrates the power of how higher KiwiSaver contributions could deliver a much better retirement for people.

Booster is pleased that 16- and 17-year-olds will now be eligible for both employer contributions and the (now halved) government contributions.

“We know that the earlier people start a savings habit, the better,” says Papadopoulos.

“At the other end of the spectrum we would have liked to see those over 65 eligible for employer contributions. Many people over 65 continue to work so it makes sense to encourage them to continue to save.

Booster hopes that there will be further changes to address the savings inequities that exist for those on low incomes and the approximate one million New Zealanders of working age who are not contributing to KiwiSaver at all. 

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*Assumes a 38-year-old with a current KiwiSaver balance of approximately $30,000 (6.4% after fees and tax at 28%), and on a salary of $80,000, 2% inflation and 3% salary growth rate, the halving of the maximum contribution and if they don’t use their KiwiSaver to buy a first home or for hardship reasons.

Booster Investment Management Limited is the issuer of the Booster KiwiSaver Scheme (Scheme). The Scheme’s Product Disclosure Statements are available at www.booster.co.nz or by contacting your financial adviser.