From that date, 16- and 17-year-olds who are employed will become eligible for compulsory employer KiwiSaver contributions. At the same time, the Government contribution will also be extended to include eligible 16- and 17-year-olds, provided they meet the usual criteria.
At first glance, this may not sound revolutionary. After all, retirement is half a century away for most 16-year-olds. But in reality, this reform could prove transformational – precisely because of that time horizon.
Why 16 matters more than you think
KiwiSaver has always been built around one powerful idea: consistent, long-term saving. The earlier that journey begins, the more potent it becomes.
When a 16-year-old earns their first pay packet from a part-time job – perhaps stacking shelves, working in hospitality, on an orchard or helping on a building site – KiwiSaver deductions may seem insignificant. A few dollars here and there. Hardly life-changing.
But the power lies in compounding.
Compounding is often described as the eighth wonder of the world. It is simply the process by which investment returns themselves start generating returns. Over decades, this snowball effect can become enormous.
For example, a young worker who contributes modestly from age 16 rather than waiting until 25 effectively gives their savings an extra nine years to grow. Those early contributions, even if small, can end up being some of the most valuable dollars invested across their lifetime.
Time in the market, not timing the market, is the real superpower in investing.
By extending employer contributions and the Government contribution to 16- and 17-year-olds, policymakers are helping normalise saving from the very beginning of working life. That behavioural shift is arguably as important as the dollars themselves.
‘Free money’ worth capturing
Under the new rules, eligible 16- and 17-year-olds will receive employer KiwiSaver contributions in the same way older employees do.
That is significant.
An employer contribution is effectively an immediate return on your savings. If a young worker contributes 3.5% (the new compulsory rate from April) of their pay and their employer matches it, their retirement savings are growing at double the rate of their own deduction before any investment returns are applied.
Few investments offer such an instant uplift.
Encouraging teenagers to understand this concept early – that KiwiSaver isn’t just money “taken out” of their pay, but money being boosted by their employer – helps build long-term financial awareness. It also reinforces an important lesson: declining KiwiSaver means walking away from part of your total remuneration package.
Govt contribution still counts
The Government contribution has been reduced from its earlier, more generous settings. But it remains valuable.
From April 2026, eligible 16- and 17-year-olds will be able to receive it too, provided they meet the minimum contribution requirements (currently contributing at least $1042.86 annually to receive the maximum Government top-up).
Even though the incentive is smaller than it once was, it is still well worth capturing. For young workers in part-time roles, it may require some planning to ensure they contribute enough across the year. But where possible, it remains one of the simplest ways to enhance long-term returns.
In practical terms, this reform ensures that younger New Zealanders are not excluded from the same structural benefits that older workers receive.
Building better retirement outcomes
There is a broader policy logic here too.
New Zealand, like many developed countries, faces long-term demographic pressures. People are living longer. The cost of living is rising. New Zealand Superannuation alone may not deliver the standard of retirement many aspire to.
Encouraging 16- and 17-year-olds on to the KiwiSaver ladder earlier increases the probability that they will arrive at retirement with materially larger balances.
The difference between starting at 16 versus 25 may not be obvious in the first few years. But over 40 or 50 years, it can mean tens – or even hundreds – of thousands of dollars in additional savings.
Small steps early in life often produce outsized results later.
Removing barriers for under-18s
There is also an encouraging industry trend underway.
At Generate, with several other KiwiSaver providers, we have removed administration fees for members under 18. The goal is simple: remove friction and make it easier for young people to begin saving.
For a 16-year-old just starting out, fees can otherwise eat into returns disproportionately. Waiving admin fees ensures more of their money remains invested and compounding.
This aligns with the broader principle that we should be making it easier – not harder – for young New Zealanders to build strong financial foundations.
Advice for under-18s (and their parents)
For 16- and 17-year-olds who are working, a few practical steps are worth considering:
1. Stay opted in.
It may be tempting to opt out when you see deductions from your pay. But remember: KiwiSaver includes employer contributions and potentially the Government contribution. Opting out often means leaving money on the table.
2. Think long term.
If retirement is 50 years away, short-term market ups and downs matter far less. Younger members may be well positioned to consider growth-oriented funds, though individual circumstances always matter.
3. Contribute enough to get the Government top-up (if possible).
Where income allows, ensuring you meet the threshold for the maximum Government contribution can significantly boost returns over time.
4. Build good money habits now.
KiwiSaver is often your first experience with investing, and starting early helps make regular saving feel normal. The biggest advantage you have at 16 or 17 is time – even small amounts invested now can grow significantly over decades. As your income increases, gradually lifting your contribution rate can make an even bigger difference over the long term.
For parents, this reform also creates a natural opportunity for conversations about money. Helping teenagers understand payslips, deductions, employer contributions and compounding can equip them with financial literacy that lasts a lifetime.
Great timing
The timing of these KiwiSaver changes is also apt. From 2027, financial literacy will become a mandatory component of the New Zealand school curriculum, with compulsory, age-appropriate money education delivered to students from Years 1 through 10. Lessons on budgeting, saving, managing debt and investing will be integrated into maths and social sciences.
That reform, combined with extending KiwiSaver benefits to 16- and 17-year-olds, creates a powerful alignment between education and action. Young people will not only be learning about compound returns and long-term investing in the classroom – they will be experiencing it in real life through their own payslips and KiwiSaver accounts. Turning theory into practice at such an early age could prove transformative for a generation’s financial wellbeing.
A cultural shift
Since its launch in 2007, KiwiSaver has fundamentally changed how New Zealanders think about retirement savings. Assets in the scheme now exceed $120 billion, and participation is widespread.
Extending full benefits to 16- and 17-year-olds represents the next evolution.
It embeds saving as a default from the very start of working life. It recognises the immense value of time in investment success. And it increases the likelihood that today’s teenagers will become tomorrow’s financially secure retirees.
For young Kiwis earning their first paycheque, KiwiSaver might not feel urgent.
But thanks to compounding, the decisions made at 16 could turn out to be some of the most important financial decisions they ever make.
Generate is a New Zealand-owned KiwiSaver and Managed Fund provider managing over $8 billion on behalf of more than 180,000 New Zealanders.
This article is intended for general information only and should not be considered financial advice. The views expressed are those of the author. All investments carry risk, and past performance is not indicative of future results.
To see Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, go to www.generatewealth.co.nz/advertising-disclosures/. The issuer is Generate Investment Management Limited.
