What the 2028 Move to 4% KiwiSaver Means for Your Projection

Most retirement projections and calculators still default to the historical 3% KiwiSaver contribution rate. But legislation passed in 2025 set in motion a staged increase that will bring both employee and employer contributions to 4% by April 2028. This isn't just a small tweak to your paycheck. It's a fundamental shift in how your retirement balance will grow, and the compounding effects are more significant than many New Zealanders realize.

If you're currently 40 to 60 years old and actively planning for retirement, this change matters now, not in 2028. The decisions you make today about voluntary contributions, fund allocation, and even your target retirement age might shift once you understand the real impact of these increases.

The move to 4% happens in three clearly defined steps, affecting both your contribution and your employer's matching contribution:

• 1 April 2026: Contributions rise to 3.5% (from the current 3%)
• 1 April 2027: Contributions increase to 3.75%
• 1 April 2028: Final increase to 4%

This gradual approach was designed to minimize the immediate impact on take-home pay and employer costs. For employers, this represents a meaningful budgeting consideration, as the total contribution (employer plus employee) effectively doubles at each stage.

What many people miss is that this isn't just about your contribution. Your employer matches each increase, meaning the total flowing into your KiwiSaver account at each pay period will be notably higher than it is today. At 4%, a person earning $70,000 annually will see $5,600 go into their KiwiSaver each year (split evenly between employee and employer), compared to $4,200 at the current 3% rate. That's an extra $1,400 annually, or about $117 per month.

The real impact of this change isn't just the extra $1,400 per year. It's what happens to that money over time. Compound returns are the engine of long-term wealth building, and even small increases in contribution rates can produce surprisingly large differences at retirement.

Consider a practical example. A 40-year-old New Zealander earning $70,000 with a current KiwiSaver balance of $50,000 is planning to retire at 65. Let's compare two scenarios using a conservative 5% annual return (after fees and tax):

Scenario A: Contributions stay at 3%

• Annual contributions: $4,200 ($70,000 × 6%, split between employee and employer)
• Projected balance at 65: approximately $293,000

Scenario B: Staged increases to 4% by 2028

• Contributions start at 3.5% in 2026, reach 4% in 2028
• Annual contributions reach $5,600 by 2028
• Projected balance at 65: approximately $340,000 to $345,000

That's a difference of roughly $47,000 to $52,000, purely from the legislated increases. No additional effort, no voluntary contributions, just the compounding effect of an extra 1% contribution over 23 to 25 years.

The earlier you are in your working life, the more dramatic this effect becomes. A 30-year-old in the same situation could see an additional $85,000 to $95,000 at retirement, because those higher contributions have 35 years to compound.

Understanding the true impact of the 4% contribution rate isn't just an intellectual exercise. It has practical implications for decisions you might be making right now:

Voluntary Contributions

If you've been considering making voluntary contributions to close a retirement savings gap, the staged increases might mean you need less than you thought. Run updated projections that incorporate the higher contribution rates before committing to a specific voluntary contribution amount. You might find that an extra $50 per week, rather than $100, gets you where you need to be.

Fund Selection and Risk Tolerance

Higher contributions mean more capital flowing into your account each year. Some investors consider this when thinking about fund selection and asset allocation, as larger balances may change how they think about their overall portfolio. Questions to discuss with a licensed Financial Advice Provider might include how the increased contribution flow interacts with your current fund's risk profile and whether your time horizon to retirement suggests any adjustments.

Retirement Timing

If you've been planning to work until 67 but have been eyeing early retirement at 63 or 64, the extra $50,000 in your KiwiSaver might make that more feasible. Early retirement requires careful planning, but the additional balance from higher contributions could be a meaningful piece of that puzzle.

Withdrawal Strategies

A larger KiwiSaver balance also affects how you think about drawdown in retirement. The gap between what you have saved and what you need to withdraw annually matters significantly for the sustainability of your retirement income. An extra $50,000 might extend your drawdown timeline by several years, depending on your withdrawal rate.

Misconception 1: "It's only 1%, how much difference can that make?"

As the modeling above shows, 1% compounded over 20 to 30 years can mean tens of thousands of dollars. The percentage seems small, but the dollar impact is substantial because it applies to every pay period between now and retirement.

Misconception 2: "My take-home pay will drop significantly"

The staged approach means your take-home pay will adjust gradually. For someone earning $70,000, the first increase to 3.5% in April 2026 represents about $29 per month less in take-home pay (before considering any tax effects). By the time you reach 4% in 2028, you'll likely have adjusted to the previous increase. Most households find these gradual changes more manageable than a single large jump.

Misconception 3: "I can just opt out or reduce my rate"

While KiwiSaver does allow for temporary rate reductions in cases of financial hardship, the default rates apply to all employees. Applying for a reduction is a significant decision and isn't a way to simply avoid the legislated increases. The increases are designed to improve retirement outcomes for all New Zealanders, and most people will benefit from staying at the default rate.

Misconception 4: "This doesn't affect me because I already contribute more than 3%"

If you currently contribute 4%, 6%, 8%, or 10%, the staged increases don't directly change your contribution rate. However, your employer's matching contribution will increase to match the new minimums (up to the required maximum). Additionally, understanding how the changes affect the broader KiwiSaver landscape can inform your own contribution strategy and retirement planning.

Most retirement calculators and projection tools allow you to input a custom contribution rate. To get an accurate picture of your retirement trajectory, you'll want to model the staged increases rather than simply using a flat 4% from today forward.

A more accurate approach includes these considerations:

• Use 3% for current contributions until April 2026
• Model 3.5% from April 2026 to March 2027
• Model 3.75% from April 2027 to March 2028
• Use 4% from April 2028 forward

Some calculators allow you to enter different contribution rates for different time periods. If yours doesn't, a reasonable approximation is to use a weighted average rate based on how many years until retirement you have at each contribution level. For someone with 25 years until retirement, using approximately 3.9% gives a reasonably close estimate.

When running projections, also remember to include:

• Government contributions (the maximum $521.43 annually, adjusted for any future changes)
• Existing KiwiSaver balance
• Expected annual salary increases
• A realistic estimate of investment returns for your fund type
• Fees charged by your KiwiSaver provider

Professional retirement planning tools, including those offered by licensed Financial Advice Providers, often have these staged increases already built into their modeling. If you're working with an adviser, ask them to show you projections both with and without the legislated increases, so you can see the specific impact on your situation.

The move to 4% contributions didn't happen in isolation. It reflects a broader recognition that many New Zealanders are undersaving for retirement. While NZ Superannuation provides a foundation, it's designed as a basic income floor, not a full replacement for working income.

Research consistently shows that relying solely on NZ Super means a significant lifestyle adjustment for most retirees. The gap between what NZ Super provides and what people need varies widely based on individual circumstances, but KiwiSaver was always intended to help bridge that gap.

By lifting the default contribution rate, policymakers are acknowledging that 3% (6% total with employer contributions) was likely too low to achieve adequate retirement outcomes for many people. The 4% rate (8% total) brings New Zealand more in line with international retirement savings benchmarks, though still below the 10% to 15% total that some retirement experts consider optimal.

This context matters because it helps explain why staying engaged with your KiwiSaver, rather than treating it as a passive account, is increasingly important. The staged increases help, but they're only part of a broader retirement strategy that might also include voluntary contributions, careful fund selection, debt reduction before retirement, and realistic planning around NZ Super eligibility and timing.

If you're currently using retirement planning tools or calculators, now is the time to update your projections to reflect the staged contribution increases. This isn't about making immediate changes to your KiwiSaver (the increases are automatic), but about getting a realistic picture of where you're headed.

Factors that may influence how you respond to these updated projections include:

• How close you are to retirement (the less time until retirement, the less impact the increases will have)
• Whether you have other retirement savings outside KiwiSaver
• Your expected retirement lifestyle and associated costs
• Whether you plan to work part-time in early retirement
• Your current debt levels and plans to pay them down before retirement

Questions to consider discussing with a licensed Financial Advice Provider include:

• Given the higher contribution rate, does my current fund allocation still align with my retirement timeline and risk tolerance?
• Do I still need the same level of voluntary contributions I had previously planned?
• How do the higher contributions affect my retirement age options?
• What withdrawal strategy makes sense given my projected final balance?

These aren't questions with one-size-fits-all answers, which is why personalized financial advice can be valuable when making these decisions.

This article is general information only and does not constitute personalised financial advice. For advice tailored to your situation, speak with a licensed Financial Advice Provider. You can find a registered adviser at fma.govt.nz.