Article written by Jason Choy, InvestNow Senior Portfolio Manager – 26th June 2025

The government has shuffled the deck with KiwiSaver in its recent budget, making changes that impact many Kiwis.

While the Retirement Commission estimates up to 80% of savers will be better off under these changes, that doesn’t guarantee financial security in retirement.

A recent Massey University study found that, even with a mortgage-free home, a comfortable retirement for a couple living in a big city could still cost up to $1.2 million – a target many Kiwis won’t reach without careful planning.

This guide explores some of the most significant changes to KiwiSaver, and provides actionable tips to ensure you’re not just contributing, but proactively growing your nest egg to meet your retirement goals.

Higher contributions – a step forward, but is it enough?

From 1 April next year, the current 3% minimum contribution from both employers and employees will rise to 3.5%, and increase again to 4% in 2028.

For a 35-year-old on an average salary of $80,000, this could mean a 25% larger balance at retirement age – a meaningful boost.

But don’t just assume you’ll automatically be better off.

For example, employees on Total Remuneration packages (i.e. your employer doesn’t pay KiwiSaver on top of your salary), won’t exactly receive a windfall as those additional employer contributions effectively come out of your own (rather than your employer’s) pocket.

Up to 45% of employers use a Total Rem approach – if you’re not sure if that’s you, it’s worth finding out.

Meanwhile, those fortunate enough to have an employer who contributes more than 3% currently may not see any increase.

If you’re job hunting or have a salary review coming up, now’s as good a time as any to negotiate for your employer to foot the bill for any KiwiSaver uplift, as it will add up meaningfully over time.

Reduced government contributions – Mitigating the impact

Effective 1 July this year, the government is halving its annual contribution from $521.43 a year to $260.72. It won’t contribute at all for those who earn more than $180k.

While it lowers the incentive to contribute to KiwiSaver, it’s still essentially free money. It can add up to nearly $13,000 over a working career (assuming you’re always eligible), and compounds into significantly more over that time.

So even if you’re self-employed or don’t contribute to KiwiSaver regularly, it’s worth making that minimum $1,042.86 payment. It’s just about the only free lunch you’ll get as a Kiwi investor.

Lower income earners are more affected, because the government contribution is a greater proportion of your overall retirement savings. In any case, it’s worth running your latest numbers on our KiwiSaver Retirement Balance Calculator to understand how your portfolio may be impacted.

If the reduced government contribution leaves you short of your retirement target, you can up your KiwiSaver contributions to offset the change, or you might prefer to invest more outside of KiwiSaver for greater flexibility. However, be cautious – unlike KiwiSaver, these funds can be accessed before the age of 65, requiring discipline to avoid dipping into them.

If you do nothing, your KiwiSaver nest egg will ultimately be worse off due to this change, although that may be offset with the additional contributions mentioned above.

The key is to be proactive and make small changes today to make up for any impacts – your future self will thank you for it.

Temporary savings reduction – Proceed with caution

From 1 February next year, KiwiSaver members have a new option to apply to temporarily reduce their employee contributions to 3% for up to 12 months initially, or beyond that subsequently.

Buyer beware though, as this also enables your employer to match their contribution at the lower rate.

It may provide flexibility during financial hardship, but lowering contributions sacrifices long-term growth.

To put some numbers to it, a $1,000 reduction in your annual contribution at the start of your working career will result in a $15,000 smaller nest egg at retirement. This is based on a 40 year working career and the average 7% annual return expected from a typical diversified growth fund.

Any suspension or lowering of KiwiSaver contributions should only ever be a last resort.

Earlier start for 16 and 17 year olds – Harnessing the power of compounding

From 1 April next year, 16 and 17 year olds can opt into KiwiSaver and receive employer and government contributions. Though auto-enrolment remains at 18, this change presents a golden opportunity for young savers.

It aligns perfectly with our investing principle to start investing early.

I don’t imagine a lot of teenagers are reading this, but if you have a teen who works, even if it’s only part time, encourage them to start contributing – they’ll gain decades of compounding growth.

Steps to bolster your retirement nest egg

While these changes are largely a step in the right direction, they’ll only have a marginal impact on your retirement outcomes if you don’t take care of the bigger ticket items.

Often that means just doing the basics right. These include:

1. Regularly assess your retirement readiness

Many Kiwis underestimate how much they’ll need. Massey’s $1.2 million figure for big city, mortgage-free couples is a sobering reminder that contributing the minimum may not suffice.

Retirement calculators like Sorted’s or InvestNow’s can project whether your investment strategy will deliver the nest egg you need. If you want it to be bigger, consider:

• Increasing your KiwiSaver contributions
• Adjusting your investment strategy for better growth potential
• Investing outside KiwiSaver

2. Align your risk profile to your retirement goals

Your KiwiSaver fund should align with both your timeline and risk tolerance to ensure you’re not taking on too much (or too little) risk to meet your retirement goals.

• Multiple decades to go before retirement? Growth or aggressive funds typically offer higher long-term returns
• Nearing retirement? Consider shifting to more balanced or conservative options while maintaining some growth assets
• Already at retirement? You don’t necessarily need to rush to cash out everything. Consider when you actually need the money. Retirement can last a long time, which could be a good case for keeping a portion of your nest egg invested for longer.

Your risk tolerance is never set in stone – it can constantly change with life milestones or a change in personal circumstances. Review your risk profile regularly using tools from Sorted or InvestNow’s Risk Profiler tool.

3. Regularly review (and consider diversifying) your KiwiSaver portfolio

A lot of the beauty and success of KiwiSaver is in its ‘set and forget’ nature, but it’s also important to regularly review your portfolio to ensure it’s continuing to meet your needs.

Your risk tolerance or ethical views might change. A fund could be a consistent long-term underperformer, or its investment strategy might change. A provider might start charging more in fees. All of these can impact whether or not a fund continues to be suitable for your goals.

There’s also a case for diversifying KiwiSaver as it grows. Diversifying investments is a time-proven strategy, and it also applies to your KiwiSaver portfolio. The InvestNow KiwiSaver Scheme is different to many others in allowing investors to diversify across different investment managers and funds.

If you are making changes to your KiwiSaver, just look to make them long-term strategic changes that align to your retirement goals, rather than knee-jerk reactions to short-term volatility or underperformance. Remember, KiwiSaver is a long-term investing vehicle.

The bottom line: take control of your financial future

The 2025 KiwiSaver changes represent progress, but true retirement security requires personal engagement with your savings strategy. While the increased contribution rates will help, they may not be enough on their own to ensure the retirement of your dreams.

One of the great things about KiwiSaver is how easy it is. Unfortunately, that also makes it easy to forget about. But being engaged and active in how you manage your KiwiSaver makes a serious difference in the long run.

Small adjustments today can have an enormous impact on your retirement lifestyle.

The most important step is to start now. The sooner you assess your position and make changes, the more confident you can be about enjoying your retirement.

At InvestNow, we know different investors have different needs. We have a wide range of options to cater for all sorts of investors, including the ability to diversify your KiwiSaver across multiple fund managers.

It only takes two minutes to sign up, and we handle all the heavy lifting if you need to switch from another provider. Find out more.

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