Finance Minister Nicola Willis announced as part of Budget 2025 yesterday the default rates of employee and matching employer KiwiSaver contributions would be raised from 3% to 4% of salary and wages, phased in over three years.
But the government’s annual contribution would be halved from 50c to 25c for each dollar a KiwiSaver member contributed per year, starting from July.
Members with an income of more than $180,000 would also no longer receive the government’s contribution.
“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,” Ms Willis said.
Grey Power Otago president Jo Millar said she had some “grave concerns”.
“And this doesn’t sound to me as though it’s going to be more productive either.”
Those earning an income of more than $180,000 would be put “on the back foot” and she could not see the value in cutting them from the government contribution.
It could be less of an incentive to save, Mrs Millar said.
“If they want to have a good savings in their KiwiSaver, they are going to have to actually go without now to keep extra going in there. There’s no incentive for people to do that.
“The cost of living and everything that we’ve got at the moment, even people on $180,000, I think, could struggle to put anything more into KiwiSaver than they already are.”
Ms Willis said people could choose to remain on the 3% rate if they wished.
Eligibility for the employer matching and government contributions would also be extended to 16 and 17-year-olds in the workforce.
Meanwhile, the maximum government contribution would be reduced from $521.43 to $260.72 per year, she said.
Mrs Millar said she was pleased eligibility had been extended to 16 and 17-year-olds in the workforce, as it was important for younger people to be educated on the benefits of saving and how it could impact their future.
But many businesses, big and small, were struggling.
“If you’re going to put extra burdens on employers by default tax, I mean, that’s just not achieving anything.
“It’s not giving them an incentive to employ more staff or grow bigger or anything.”
