Lisa Dudson: finance expert on the Government's new changes to KiwiSaver

In a bid to boost Kiwis' retirement savings, the Government is increasing the default KiwiSaver contribution rate to 3.5 percent next year and then 4 percent by April 2028. 

The scheme will also be extended to 16 and 17-year-olds from April 1, 2026 - they will need to opt in, as the automatic enrolment will remain at 18.

The Government contribution rate, however, will reduce by half, from 50c for each dollar a member contributes to 25c, from July 1 this year.

In addition, those earning over $180,000 will no longer receive a Government contribution.

Finance expert Lisa Dudson says these changes will help people build up more for their retirements and first home deposits - but there's concerns as to how it will impact low-income earners.

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Episode Transcript

Speaker 1 (00:07):
You're listening to the Saturday Morning with Jack team podcast
from News Talks that'd be.

Speaker 2 (00:12):
So it was kind of not necessarily the centerpiece, but
a big part of the government's budgets. On Thursday, several changes,
notable changes to the key we Save a scheme. Lisa
Dudson is our personal finance expertencies with us. Now, Hey, Lisa,
good morning Jack. So let's run through a couple of
these changes and explain what they're going to mean for people.
Let's start off with the contribution rate. So they're staggering

(00:33):
the increase from three percent up to four percent. It
goes to three and a half percent next year, and
then to four percent by April twenty twenty eight. What's
this going to mean?

Speaker 3 (00:42):
Well, I actually think for most people it's going to
be a really good thing because I guess it's going
to be growing their balances for the long term, so
that's you know, no one can really complain about that.
It also helps home buyers build up a bigger deposit
for their home. The challenge has been for you know,
some commentators believe that it's going to be a little

(01:03):
bit harder for those who are on a lower income
to be to afford those four percent increases when they
come in.

Speaker 2 (01:09):
Yeah, I mean, can you understand how that might be
tricky for some people, But yeah, by staggering, hopefully you know,
they'll be able to make that transition. It's also going
to be a little bit harder for business as well,
of course, I mean this.

Speaker 3 (01:22):
Is good well know, yeah, well yeah, and given you know,
times of puff and we're still in a bit of
a cost of living crisis, so you know, I think,
you know, it's trying to balance that short term versus
long term, right, because on one hand we kind of go,
we're things are a bit tough at the moment, just
but on the other hand, we're going, well, if we
don't start contributing more to our super then we're having
hard time financially, you know, when we're post that sixty five.

(01:45):
So you know, it's just trying to find a balance.
And interestingly, when you compare it to Australia, who started
a sort of three to four percent in nineteen ninety two,
it took them almost twenty years to start to increase
it to nine percent and then now it's I think
it was twelve and July. Yeah, so that's kind of
where we need to be heading. And I guess once
these stanges come in, we'll be at eight each between

(02:07):
the employee or close to eight between the employee and
the employer. So we're you know, we're getting there.

Speaker 2 (02:12):
Twelve percent. You think about that like a quarter of
you know, if you have a twelve percent employee salary,
twelve percent contribution from the employer as well, you're looking
at a quarter of your salary.

Speaker 3 (02:22):
And yeah, I know, yeah here, yeah, right, okay.

Speaker 2 (02:27):
I checked. I checked out the tax rates too for
the for the employer contribution and for most people I think,
you know, depending on incomes, most people would be taxed
less on the employer contributions in Australia than they would
in New Zealand as well, which is interesting. So the
scheme's being extended now from to sixteen and seventeen year olds.
So you get automatically enrolled in keep we say, for

(02:48):
at eighteen, but you can voluntarily opt in a little
bit earlier. That's going to be a good thing, right.

Speaker 3 (02:54):
Yeah, Well, because you have a couple of extra years
to sort of build towards your home deposit or you
and or you know, your future you know, retirement pot
of money, so you know, that's great. I think the
other side effect is that might be the you know,
younger people are starting to get a sense of, you know,
how the financial world works from it's like the younger age,
So that can't be bad. So I think I think

(03:16):
most of U should be pretty happy about that new policy.

Speaker 2 (03:20):
What do you think about the government contribution changes though?

Speaker 3 (03:24):
Ah, you know, again, it's you know, it's always trying
to find that balance between you know, different people circumstances.
But I think, you know, they're trying to save the
money overall. I guess the government's trying to be a
bit more fiscally responsible because they realize that there's there's
been more money going out and coming in the last
couple of years, and sometimes that comes home to roost.
So you know, for some people it's not necessarily not ideal,

(03:46):
you know, the effect cost for most people if now
contributing to QB sabers, two hundred and sixty dollars a
year doesn't sound like a lot, but it does add
up over time. You know, for those under one hundred
and eighty thousand SORR, I've paid over one hundred and
eighty thousand dollars, they lose it all together. Is it
really going to make a difference to people earning that
high level of income. No, so maybe not necessarily ideal,

(04:09):
but you know, you can't hear everything.

Speaker 2 (04:11):
Yeah, yeah, it's interesting. It's going to be fascinating to
see how it all, you know, unfolds over the next
months and years. Thank you very much, Lisa. Important to
point out too that I think the big changes for
the contribution, for the government contribution, they don't come into
effect until next year. So at the moment, if you
haven't if you like, if you're self employed, for example,
and you want the government contribution, you could go in

(04:34):
and do the minimum or do the do the one
forty two dollars. I think it's by the end of June,
and if you've gotten in on time, so long as
you've got it in on time, you will get the
maximum government contribution for this year, which is what five
hundred and twenty one dollars. So next year it'll be different,
but you get the maximum contribution five hundred and twenty

(04:54):
one dollars this year, so long as you make that
contribution on time.

Speaker 1 (04:58):
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Speaker 3 (05:06):
Know