KiwiSaver and Redundancy in NZ: What Happens to Contributions, Your Match and Your Balance

Made redundant in NZ? KiwiSaver is generally not deducted from a redundancy payment, your deductions just pause when your pay stops, and you can keep the government contribution going by topping up voluntarily. Here is how it works.

Losing a job is unsettling enough without also wondering what it does to your KiwiSaver. The good news is that redundancy is mostly a pause, not a problem. Your deductions stop when your pay stops, your balance stays invested, and there are a few simple steps that protect the parts that matter most. This guide walks through what actually happens to your contributions, your employer match and the annual government contribution when you are made redundant in New Zealand.

TL;DR: KiwiSaver is generally not deducted from a redundancy or severance payment ¹. When your pay stops, so do your deductions and employer match, but your money stays invested. You do not normally need a savings suspension ⁸. To keep the full government contribution of up to $260.72 a year, you can top up voluntarily before 30 June ²⁵.

Is KiwiSaver deducted from a redundancy or severance payment?

Generally, no. Most redundancy and severance payments are not treated as "salary or wages" for KiwiSaver purposes, so KiwiSaver contributions are usually not deducted from them ¹. The same applies to many retirement and one-off termination payments.

That means your final redundancy lump sum normally lands without a KiwiSaver deduction taken out. Your last few weeks of ordinary pay are different: if you work out a notice period and are paid as normal, KiwiSaver still comes out of that ordinary pay in the usual way. It is the redundancy or severance portion itself that generally sits outside the deduction rules.

Payments can be structured in different ways, and the deductible status of any particular payment depends on how it is classified under Inland Revenue's salary-or-wages definition ¹. If you are not sure how your payment has been treated, your employer's payroll team or your final payslip will show whether KiwiSaver was deducted, and you can confirm the treatment with Inland Revenue.

What happens to your KiwiSaver when you stop working?

When you stop earning a salary, three things change, and one important thing does not.

• Your contributions pause. No pay means no PAYE deductions, so your own KiwiSaver contributions simply stop until you earn salary or wages again.
• Your employer match pauses. Compulsory employer contributions only apply to salary or wages paid through PAYE, so they stop at the same time ¹⁰.
• The annual government contribution can taper. The government contribution is based on how much of your own money you put in across the KiwiSaver year, so a long gap with no contributions reduces what you receive unless you top up ²⁵.
• Your balance stays invested. This is the part that does not change. Your existing KiwiSaver balance remains in your fund, still invested, still rising and falling with markets. It is not frozen, withdrawn or penalised because you have left a job.

In other words, a redundancy gap is a pause in the inflows, not a reset of the account. The money you have already built keeps working.

Your KiwiSaver through a redundancy gap

Figure: Your KiwiSaver through a redundancy gap. Timeline, modelled from IRD redundancy and KiwiSaver rules, 2026.

The key date to keep in view is 30 June, the cut-off for the government contribution year. A redundancy that straddles that date is where a small voluntary top-up can be worth the most.

Do you need a savings suspension between jobs?

Usually not. A savings suspension is a formal pause on the contributions deducted from your salary or wages ⁸. If you have no salary or wages because you are between jobs, there is nothing being deducted to suspend in the first place, so a suspension is generally unnecessary.

It is worth understanding the rules in case your situation changes:

• If you have been a contributing member for 12 months or more, you can apply for a savings suspension of between 3 months and 1 year, without giving a reason ⁸.
• If you have been a member for less than 12 months, you can only apply for an early savings suspension, and you must show evidence of significant financial hardship for reasons outside your control; the default period is 3 months ⁹.

A suspension becomes relevant once you start a new job and want to keep your take-home pay higher for a while, rather than during the gap itself. For most people moving between jobs, the simpler picture is that deductions stop on their own and restart on their own. Our guide on the KiwiSaver savings suspension and contribution break covers the trade-offs if you are weighing one up.

Can you withdraw KiwiSaver if you're made redundant?

Redundancy on its own is not a ground for an early KiwiSaver withdrawal ⁷. KiwiSaver is built as a long-term retirement and first-home savings scheme, and being between jobs does not unlock it.

There is a separate process for significant financial hardship, which is assessed by your scheme provider and has its own criteria. It generally requires evidence that you cannot meet things like minimum living costs or mortgage repayments, and it is not automatic ⁷. A hardship withdrawal is a last resort, not a routine response to redundancy, and provider assessment can take time. We cover the test and the evidence involved in our KiwiSaver hardship withdrawal guide.

Before going down that path, it is usually worth checking other supports first, including any redundancy payment, your emergency savings, and Work and Income assistance you may be entitled to. KiwiSaver is generally the money you want to leave invested, because withdrawing early also gives up the future growth on it.

How do you keep the government contribution after losing your job?

This is where a small, deliberate step can protect real money. The government contribution is paid at 25 cents for every $1 of your own eligible contributions across the KiwiSaver year, up to a maximum of $260.72 ². That rate and maximum took effect on 1 July 2025, when the previous figures were halved ².

To receive the full $260.72, you need to have contributed at least $1,042.86 of your own money between 1 July and 30 June ³. While you are employed, PAYE deductions usually do most of that work for you. While you are between jobs, those deductions stop, so without action you can fall short.

The fix is a voluntary contribution. You can pay your scheme provider or Inland Revenue directly, at any time, including while you are not working, and it counts towards the threshold ⁵. You do not have to put in the whole $1,042.86 at once; you can top up whatever you have already contributed earlier in the year to reach the threshold before 30 June.

Modelled from IRD government-contribution rules, year ending 30 June 2026.

A few eligibility points matter here. You generally need to be aged 18 to 64 (16- and 17-year-olds who contribute became eligible from 1 July 2025), mainly living in New Zealand, and earning under $180,000 of annual taxable income; from 1 July 2025, people over that income cap are no longer eligible for the government contribution ⁴. If a redundancy means your income for the year ends up well under $180,000, the top-up may be more relevant to you than usual. Our government contribution top-up guide sets out the 30 June timing in more detail.

What changes when you start a new job — fund, rate, opt-in?

Starting a new job is mostly automatic for an existing KiwiSaver member. You do not need to re-join or opt in again. Once you are being paid through PAYE, your KiwiSaver deductions restart, and compulsory employer contributions resume automatically ⁶¹⁰.

A few things are worth checking at the same time:

• Your contribution rate. The minimum default employee and employer rates are each 3% of before-tax pay, rising to 3.5% from 1 April 2026 and to 4% from 1 April 2028 ⁶. When you start, you can confirm with your new employer which rate you want to contribute at.
• Your fund. Changing jobs does not change your fund or provider. Your existing account simply starts receiving contributions again. It is, though, a natural moment to confirm the fund still suits your timeframe and comfort with risk.
• No new opt-in needed. As an existing member you carry your same KiwiSaver account with you, so there is nothing to re-sign.

If you took a new role on a lower or higher income, or your time horizon to retirement or a first home has shifted, that is a reasonable prompt to review your settings rather than letting them run on default.

Should you keep contributing voluntarily while job-hunting?

There is no single right answer, and it depends on your cash position. Keeping some contributions going has clear benefits, but so does holding cash when income has stopped. The balanced view is to weigh both.

Reasons some people choose to keep contributing voluntarily while between jobs:

• It keeps you on track for the government contribution of up to $260.72, which is a 25% return on the money you put in towards the threshold ²³.
• It keeps the habit and the compounding going rather than leaving a full-year gap.

Reasons some people pause entirely until they are earning again:

• When income has stopped, an accessible cash buffer usually matters more than topping up a long-term, locked-in account.
• KiwiSaver money you contribute is generally not available again until retirement or a qualifying withdrawal, so it is not emergency money.

A reasonable middle path for many people is to protect just the government contribution, by topping up to the $1,042.86 threshold if they are close, rather than contributing at their full former rate. Whether that is right for you depends on how long you expect to be out of work and how much cash you have on hand.

Reviewing your fund and plan after a restructure

A redundancy or restructure is a natural point to take stock, calmly, once the immediate decisions are made. Three things are worth a look:

1. Your fund choice. If your timeframe to needing the money has changed, or recent market movements have made you rethink your comfort with risk, your current fund may or may not still fit. Switching is reversible, but reacting to a single bad month is rarely a good reason to move.

2. Your government-contribution position. If the gap crosses 30 June, check whether a voluntary top-up makes sense to secure the full $260.72 ²³.

3. Your wider plan. Redundancy often coincides with other changes, including income protection or mortgage cover that may have been tied to your old job. Sorted's free KiwiSaver fund finder is a neutral place to compare funds from providers such as Simplicity, Milford, Booster, Generate, Kernel and Fisher Funds on fees and estimated cost.

If you would like a second pair of eyes, our guide on when to see a financial adviser outlines the moments, like a redundancy, where it can help to talk things through.

Frequently asked questions

Is KiwiSaver taken out of my redundancy pay in NZ? Generally no. Most redundancy and severance payments are not treated as salary or wages for KiwiSaver purposes, so KiwiSaver contributions are usually not deducted from them ¹. Ordinary pay during a worked notice period is different and still has KiwiSaver deducted. Check your final payslip or confirm the treatment with Inland Revenue.

Can I withdraw my KiwiSaver because I lost my job? Redundancy on its own is not a ground for early withdrawal ⁷. There is a separate significant financial hardship process, assessed by your provider with evidence required, but it is a last resort rather than a routine response to redundancy.

Do I need a savings suspension while I'm between jobs? Usually not. A savings suspension only pauses deductions from salary or wages, and if you have no income there is nothing to suspend ⁸. A suspension is more relevant once you are back in work and want to pause deductions for 3 to 12 months.

How do I keep the government contribution if I'm not working? Make voluntary contributions to your provider or Inland Revenue, which you can do at any time, including between jobs ⁵. To receive the full $260.72 you need to contribute at least $1,042.86 of your own money between 1 July and 30 June ²³.

Will my employer contributions restart automatically in a new job? Yes. For an existing KiwiSaver member, compulsory employer contributions resume automatically once you start a new job and contribute through PAYE; you do not need to opt in again ⁶¹⁰.

What happens to my KiwiSaver balance while I'm out of work? It stays invested in your fund. Your balance is not frozen or withdrawn because you left a job; it continues to rise and fall with markets while your contributions are paused.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds, and is a member of the Financial Dispute Resolution Service (FDRS). Returns are not guaranteed and the value of investments can go down as well as up. KiwiSaver is a long-term savings scheme; government contributions, contribution rates and rules are set by the Government and can change. Figures are correct as at 20 October 2025 — check current rules at ird.govt.nz. Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 20 October 2025.