Following the changes to the KiwiSaver Scheme contribution rules announced in the most recent Budget, we have made some commentary here, particularly for those of you who are self-employed earning over $180,000, where the government contribution will cease.

The full changes are:

1. The government contribution is being halved to 25 cents for every dollar a member contributes year, up to a maximum of $260.72.   Currently, where a member contributes $1,042.86 pa, the government contributes $521.46.  From hereon the minimum contribution of $1,042.86 is still needed to be made by the member (either via voluntary contributions or employee payments) to get the reduced $260.72

• The default rate of employee and employer contributions will rise from 3% of salary to 4% in two steps.  From 1^st April 2026 the rate will go up to 3.5%, and from 1^st April 2028, it will increase to 4%.  The increases are being phased in over a three year period to help workers and employers plan ahead

Employees will have the option to roll their contribution rate back down to the 3% rate and their employer can then match it at that lower rate, too.  This will be a temporary option if, for example, they feel they are unable to afford the increased contribution for a period of time

• Members with an income of more than $180,000 pa will no longer receive the government contribution from 1^st July 2025

• The government contribution is being extended to include 16 and 17 year olds from 1^st July 2025, and employers will have to contribute to these age groups too from 1^st April 2026

For any of you who are self-employed earning over $180,000 pa, who have been contributing the minimum regularly to receive the government contribution, you may now be asking yourself if you should stop your contributions as you will no longer receive the government credit?   

We have the following comments that you might want to consider:

• If you stop your contributions, what else are you going to do with those funds?  Where will you redirect them to in order to support the growth for your retirement savings?
• If you redirect them to other growth investments for the longer-term, where this money may not be locked-in, that could be a good thing.  However, be mindful that not having any ‘lock-in’ means that you need to be disciplined in leaving this money to grow for your retirement, as it can be tempting to access it sooner than ideal, for other spending needs
• As the existing balance cannot be accessed until age 65, continuing to contribute into a quality investment portfolio will help grow a ‘pot of money’ that will be useful for you in retirement.  Do bear in mind however, that whilst the rules currently say KiwiSaver Scheme money can be accessed at age 65, this may change if the government increases the age of eligibility
• Whilst it is disappointing to have lost the government contribution, when focussing on your wider plans to grow your wealth for your retirement years, continuing on saving may be the wise choice

If you wish to discuss your own particular circumstances, please feel free to reach out to us.

Charlene Overell
G3 Financial Freedom

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