KiwiSaver Contribution Increase Boosts Retirement Savings for 1.8 Million Kiwis

99.5 per cent of people contributing to KiwiSaver through their wages or salaries can look forward to greater security in retirement thanks to the increase in contribution rates, Finance Minister Nicola Willis says.

Almost three months after the default contribution rate for the scheme was lifted, only half a per cent of regular contributors have opted out of the increase.

This means hundreds of thousands of Kiwis will be better off in retirement.

KiwiSaver has just under 3.5 million members of whom about 1.8 million are contributing to their accounts through employee deductions. Of those 1.8 million, just 9300 have opted out of the increase that took effect on 1 April, choosing instead to remain on the previous 3 per cent rate.

I’m delighted that so many New Zealanders have recognised the value of increasing their contributions and having those increases matched by their employers.

Effectively this means the contributions to the KiwiSaver accounts of 1.8 million New Zealanders have increased from 6 to 7 per cent of their wages or salaries.

It says a lot about Kiwis’ priorities that even while financial conditions are tough for many, the vast majority are choosing to take the opportunity to save for a better financial future.

Small differences in weekly contributions make a big difference over the life of a superannuation scheme.

The default contribution rate increased from 3 to 3.5 per cent on 1 April and will increase a further 0.5 per cent on 1 April 2028.

That means an 18-year-old earning the minimum wage of just under $50,000 who joined the scheme on April 1 will have $930,000 in their KiwiSaver at age 65 if their earnings follow a typical trajectory, Nicola Willis says.

That is $190,000 more than they would have had with the old 3 per cent contribution rate.

Most New Zealanders have already embraced KiwiSaver as a simple way of saving to supplement their income in retirement. These changes will provide them with greater financial security.

They also mean young New Zealanders will be better placed to get a foot on the property ladder as KiwiSaver balances can be put towards the purchase of first homes.