New KiwiSaver rates in April will spur some NZers to boost retirement savings.

An average Kiwi Saver member could earn up to an extra $173,000 by taking advantage of new KiwiSaver contribution rates that come into force in April.

That's the result from a case study testing new legislation which takes effect on April 1 – allowing increased contributions to KiwiSaver from the current three percent, four per cent or eight per cent.

KiwiSaver expert Joe Bishop, General Manager of Customer, Product & Innovation for Kiwi Wealth, the largest, wholly locally-owned KiwiSaver provider with over 200,000 members, says adding six per cent or 10 per cent contribution rates represents a new era for KiwiSaver: "It is so good the government has responded to people telling them they want more choice, flexibility and control over their KiwiSaver."

Bishop says a look at a typical KiwiSaver member shows the big difference that can accrue to a KiwiSaver account with increased employee contributions.


Using a fictional woman, Anne, who is single, 39, earning $60,000 a year, with $30,000 already in her KiwiSaver fund (a growth fund), estimated projections of the extra money Anne could expect range from $27,000 to $175,000*.

  • If Anne stays at 3 per cent, her projected KiwiSaver total is $203,151 when she reaches retirement age of 65.
  • If she increases it to four percent, it rises to $228, 135.
  • At six per cent, she will earn $277,648
  • At eight percent, her total will rise to $327,118
  • At 10 per cent, she will accrue $376,588 – about $173,000 more than the three per cent total.

*Return of growth fund assessed at 4.61 per cent, after fees and taxes

If Anne invests that (three per cent total) $201,151, it could give her an estimated in-retirement income of about $9,300 a year. If she invests $376,588 (the 10 per cent total), she could earn an estimated in-retirement income of about $17,200 a year. In both cases, that can be added to her NZ Superannuation annual income (for a single person) of about $19,200**. That gives her a living wage of $28,500 at the three per cent rate or about $36,400 at the 10 per cent rate.

"You can see how that makes a significant difference to people in that stage of life," says Bishop who acknowledges not everybody will be able to afford 10 per cent contributions.

However, he predicts many will choose to increase their contributions to the new six per cent rates with people in their early 20s and mid-50s the most likely to raise savings levels.

KiwiSaver expert Joe Bishop, General Manager of Customer, Product & Innovation for Kiwi Wealth. Photo / Supplied.
KiwiSaver expert Joe Bishop, General Manager of Customer, Product & Innovation for Kiwi Wealth. Photo / Supplied.

"I think six per cent will appeal to a lot of people," he says. "A jump from three or four per cent to eight per cent seems a lot to many. Six per cent will feel a lot more achievable.

"The mid-50s are in what we call a sprint to retirement. They are often people who haven't put much aside because they have been buying a house and raising a family – all those day-to-day issues which can make saving a challenge.

"They are often still earning quite a bit and spending less – so they start to turn their eyes towards the horizon and what's ahead. That's when they turn to KiwiSaver and set themselves a goal.


"They are the ones who will look at six or eight or 10 per cent and will say to themselves: 'Actually, I can afford a little more to pay towards retirement."

Kiwi Wealth's KiwiSaver members can use a digital retirement income planning tool called Future You to show people what they can aim for and how they can set a goal for their retirement savings. It provides realistic options for people to see how changes to factors such as fund type and contribution level could influence the growth trajectory of their investment.

"Often publicity about the huge sums some commentators say people will need for a comfortable retirement can be entirely intimidating and discouraging. So we use research from Massey University to let people see what they will need for a no frills lifestyle, a flexible lifestyle and a deluxe lifestyle," Bishop says.

"No frills" covers only basic living expenses; "flexible" covers the basics plus luxuries and treats and "deluxe" covers all of that plus the ability to take an overseas holiday for leisure or to see grandchildren living overseas. Users can also create a custom goal that helps them get a more specific estimate of their retirement lifestyle costs, allowing them to make more informed decisions relating to their KiwiSaver investment.

Those in their 20s are the other age group Bishop predicts will increase their contribution rates from April: "KiwiSaver allows you to take out all your contributions except for $1000 and put it towards buying a first house – as long as you have never owned a home before.

"For many in their 20s, that gives them a reasonable chance of saving the money they need for a deposit without having to rely on the bank of mum and dad or being disincentivised by the size of the task as they struggle to get that deposit together."

**Uses the current 'single sharing' superannuation rate of $370.03 a week.