With government KiwiSaver contributions set to halve, is there a better way to save for retirement? Frances Cook breaks it down.

Love it or hate it, KiwiSaver just got a shakeup.

The government contribution is being halved, from $521 to $260 a year. And if you’re earning a good income, over $180,000? You’ll lose it altogether.

I’ll be honest from the get-go: I don’t love it.

KiwiSaver already doesn’t have as many perks as schemes like Australia’s Super, with its generous tax benefits, and much higher employer contributions.

Frankly, we’re losing enough of our bright sparks to Australia, and don’t need to lose any more.

To be fair, the KiwiSaver changes aren’t all bad, either. Sixteen and 17-year-olds finally get KiwiSaver benefits, and it’s about time.

The government has also bumped up the contribution rate, which will slowly shift over the next two years to be a default 4% from you, and 4% from your employer.

Whether you’re team Love It, or team Hate It, let’s lay out exactly what’s changed and what you need to know to make sure your future nest egg is working smarter, not harder.

The good: a bigger employer boost

Bumping up the minimum contribution to 4% means more going into your savings. That’s great, in theory. Especially when it’s partly coming from your boss.

Here’s the fine print you should watch out for.

Some employers use a “total remuneration” model, where your KiwiSaver contribution is technically included in your salary package. So that 4% might be coming from money you would’ve otherwise been paid in cash.

In fact, Treasury’s own analysis expects 80% of that extra contribution to be offset by lower pay rises.

A savings boost is still better than nothing, but let’s not pretend it’s all upside or bonus funds.

Still, if you’re lucky enough to have an employer actually contributing extra to your KiwiSaver, that compound growth will help you a lot over time.

The bad: cutting the government top-up

One of KiwiSaver’s big perks has always been the government contribution.

It used to be that if you contributed at least $1,042.86 a year, the government would chip in $521. That perk has now been halved, to only $260. Just 25 cents for every dollar you put in (up to $1,042 of your dollars).

Sure, I guess it’s better than zero, but it’s a downgrade. And that hurts, especially for self-employed people, who don’t get employer contributions and often relied on that top-up as their only extra boost.

If that’s you, it’s still worth putting in $1,042.86 each year. That $260 match is worth it, and still a good slice of cash to have.

It’s just a little galling to have it constantly chipped away at.

The risk: political football syndrome

One of the most common things I hear in my inbox right now? “How can we trust KiwiSaver if the rules keep changing?”

It’s a fair question. Retirement planning is long-term. And tinkering by politicians doesn’t exactly build confidence, especially when the tinkering always seems to be in the form of cutting back, rather than building up.

But let’s zoom out. KiwiSaver is still one of the best tools available for building long-term wealth.

Your money is legally yours. It’s not held by the government, but by investment providers. The government can tweak the incentives, but they can’t take your money.

That said, yes, changes might keep coming. So the key is to take charge of what you can control.

One of the biggest mistakes people make with their KiwiSaver is having it in the wrong fund.

Conservative when it should be growth, or growth when it should be conservative.

It’s a setting that takes 10 minutes to change, and could mean a difference of hundreds of thousands of dollars by the time you retire. Far more than any government contribution would add up to.

Not sure which one you should be using?

Try the Sorted Fund Finder. It’s free, independent and really easy to use.

What next?

This Budget made one thing painfully clear: no one’s handing out freebies.

If you want a good retirement, you’ll need to build it yourself. That means reviewing your KiwiSaver, boosting your savings rate where you can, and making sure you’re in the right fund.

You don’t need to do everything at once, but ignoring it altogether will cost you.

Pick one thing. Change it. Then keep going.