How a Pay Rise, Bonus or New Job Changes Your KiwiSaver PIR (NZ, 2026)

A pay rise, bonus or new job can change your KiwiSaver PIR, but not always straight away. Here is how the two prior income years rule creates a lag, when a higher rate kicks in, and what the year-end square-up costs if you leave it.

TL;DR: Your KiwiSaver PIR is 10.5%, 17.5% or 28%, set by your income across the last two income years — and you use the lower of the two. So a pay rise usually does not change your rate straight away; the higher rate only locks in once both prior years sit above the threshold. A one-off bonus rarely shifts it at all. If your PIR ends up too low, IRD collects the shortfall at the year-end square-up.

A pay rise is good news. A new job or a promotion usually is too. But people often assume any jump in income means they need to rush off and change their KiwiSaver tax rate. Usually they do not — at least not yet — and understanding why saves a lot of second-guessing.

This is general information about how the Prescribed Investor Rate (PIR) responds to a change in your income. It explains the lag built into the rules, when a higher rate genuinely kicks in, and what happens at year-end if you leave a too-low rate running. Your own situation will differ, so treat the examples as illustrations rather than a verdict on your rate.

Do I need to change my PIR after a pay rise?

Not necessarily, and often not for a while. This is the part that surprises people.

Your PIR is the tax rate applied to the income your KiwiSaver fund earns — your fund is a Portfolio Investment Entity, or PIE, and the PIR is the rate it taxes your share of the returns at ¹. There are three resident rates: 10.5%, 17.5% and 28%. Only certain non-individuals such as companies and trusts can use 0%; as an individual you cannot ¹.

Here is the key. Your PIR for the current tax year (ending 31 March 2026) is worked out from your income in each of the last two income years, and if those two years point to two different rates, you use the lower one ³. Your rate is not set by what you earn today. It is set by what you earned, looking back.

So a pay rise this month does not feed into your PIR this month. It only matters once it has flowed through the income years the rules look at — and even then, only if both of the relevant years sit above the threshold for the higher rate.

How the two prior income years rule creates a lag

The "lower of the last two income years" rule is there to stop your rate bouncing around every time your income wobbles. The side effect is a built-in lag after a pay rise.

Walk it through. The thresholds (in force from 1 April 2025) are ²:

Source: IRD PIR thresholds effective 1 April 2025 ².

Because you take the lower of your two prior years, a single high year does not move you up on its own. The higher rate only applies once both of the prior years clear the threshold ³.

The lag in practice

Say you earned $48,000 in the year ended 31 March 2025, then got a pay rise mid-2025 lifting you to $60,000. Here is how the rate resolves for the current year.

Even though the most recent year crosses into 28% territory, the earlier year still points to 17.5% — so the lower-rate rule keeps you on 17.5% for now ³. It is only the following year, once two consecutive years both sit above $53,500, that 28% becomes your correct rate.

Figure — income change vs PIR change timeline

The timeline below shows how a pay rise this year may not change your PIR until two income years line up above the threshold.

Source: IRD PIR rules — "use the lower of your last two income years" ³, new rate applies to future periods ⁷.

The takeaway: the rules give you a grace period by design. The risk is forgetting to act once that grace period ends.

Does a one-off bonus change my PIR?

Usually not. A one-off bonus is taxed as income in the year you receive it, but it only affects your PIR if it pushes both of the relevant prior years over a threshold — and a single bonus, by definition, lands in one year, not two ⁶.

For most people a bonus is the textbook case where the two-year rule absorbs the spike. The year you get the bonus might point to a higher rate, but the other prior year does not, so the lower-rate rule keeps your PIR where it was ³. PIE income is generally a final tax when you are on the correct rate, so there is no return to file and no separate reckoning for that one good year ⁶.

The exception is a bonus large enough, or a run of bonuses regular enough, to lift two consecutive years above the threshold. At that point it is no longer a one-off — it is a higher sustained income, and the rate should follow. If you are unsure whether a bonus tips you over, the sensible move is to check your taxable income for both prior years against the table rather than guess.

When a new job or promotion does push you to a higher PIR

A new job or a promotion is different from a one-off bonus because it usually represents a sustained higher income. Once two income years both sit above the relevant threshold, the higher PIR is the correct rate, and continuing on the old lower rate means you are under-taxing your KiwiSaver returns ³.

A new PIR you notify to your provider applies to future periods only — it is not backdated ⁷. So the timing matters: updating promptly once the higher rate genuinely applies is what limits a shortfall building up over the year.

Some situations worth weighing up if you have changed jobs or stepped up:

• A promotion that takes you over a threshold for two years running. Once both prior years clear $53,500 (taxable income) or $78,100 (taxable plus PIE income), 28% is the correct rate ².
• Moving from part-time to full-time. A sustained jump from, say, $35,000 to $70,000 will eventually move you from 17.5% to 28% once both prior years reflect the higher figure.
• A new job mid-year. The pay rise only counts in full from the income year it is fully reflected in, so the lag still applies — but keep an eye on the year after.

If you do not give your provider a PIR at all when you join a new scheme, the default rate of 28% is applied ⁴. That is the highest rate, so for a higher earner the default may be correct, but for many people it is too high — which is the opposite problem, covered in our guide to whether your PIR is too high.

What happens at year-end if you didn't update in time?

If your PIR was too low during the year, you do not get away with it — but nor is it a disaster you cannot fix. IRD squares it up at the end of the year.

Since 1 April 2020, the year-end process works like this ⁵:

• IRD calculates the outstanding PIE tax liability where your PIR was too low, and includes it as tax to pay alongside your other income at the automatic income tax assessment ⁵.
• Where your PIR was too high, the overpaid PIE tax is used to reduce any income tax you owe, and any remainder is refunded to you ⁵.

So a too-low rate is not a permanent saving — it is a deferral. The shortfall lands as a bill at the square-up, and if you have moved up a rate you may owe the difference on a year's worth of fund earnings ⁵. Our companion guides explain both sides: how the end-of-year PIE square-up is calculated, and what a too-low PIR tax bill typically looks like.

Because the new rate is not backdated when you notify your provider ⁷, updating promptly is the lever that limits how big any shortfall gets.

How often should you review your PIR?

Once a year is a sensible rhythm for most people, and after any meaningful change in income — a pay rise, a new job, a return to work, or stepping back to part-time.

The two-year rule cuts both ways. It means a higher income takes a while to lift your rate, and it also means a lower income (parental leave, study, redundancy, a move to part-time) can legitimately lower your rate — sometimes for up to two years even as you ramp back up ³. So a review is not only about catching a rate that has crept too low after a pay rise; it is just as often about catching a rate left too high after an income drop.

A good time to check is when you do your other annual KiwiSaver housekeeping — confirming your contribution rate, your fund choice, and whether you are on track for the government contribution. A quick KiwiSaver review covers the PIR alongside the rest.

Setting a reminder so your PIR stays right

The whole problem with the PIR is that nothing forces you to look at it. PIE income is a final tax when the rate is correct, so there is no annual return prompting a check ⁶, and your provider will not change the rate for you. The fix is to make the check deliberate.

A few simple habits help:

• Diarise an annual PIR check — a calendar reminder each year, ideally near the start of the tax year, so a rate change is current before the year runs.
• Check after every income event — a pay rise, a new job, a promotion, a return from leave, or a move to part-time.
• Hold both prior years' taxable income handy — your IRD income summary shows it, and you compare the lower year against the table ³.
• Update with your provider, not IRD — the rate applies going forward, so the sooner you set it after a sustained change, the smaller any year-end adjustment ⁷.

None of this needs an accountant. It is a two-minute check, done on a schedule, on a setting most people only ever tick once.

Frequently asked questions

Does a pay rise change my KiwiSaver PIR straight away? Usually not. Your PIR uses your income across the last two income years and takes the lower of the two, so a pay rise only lifts your rate once both prior years sit above the threshold. Until then the lower rate generally still applies ³.

Will a one-off bonus push me to a higher PIR? Rarely. A bonus lands in a single income year, and the two-year rule takes the lower year — so unless the bonus (or a run of them) lifts both prior years over a threshold, your PIR usually stays put. On the correct rate, PIE income is generally a final tax ⁶.

When does a new job actually change my rate? Once the higher income is sustained across two income years that both clear the threshold — $53,500 taxable income, or $78,100 taxable plus PIE income — 28% becomes the correct rate ²³. A new rate you notify applies to future periods only and is not backdated ⁷.

What happens if my PIR was too low all year? At the year-end square-up, IRD calculates the outstanding PIE tax and adds it to your tax to pay. A too-low rate defers tax rather than avoids it; the shortfall arrives as a bill ⁵.

What is the default PIR if I give a new provider nothing? 28% — the highest rate. It is applied automatically if you do not supply a PIR, which may be correct for a higher earner but too high for many people ⁴.

How often should I check my PIR? Once a year, and after any meaningful income change. The two-year rule means both a recent rise and a recent drop can affect the rate, so an annual check catches a rate that is now too low or too high ³.

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. KiwiSaver is a long-term savings scheme; contribution rules, tax (PIR) settings and thresholds are set by the Government and can change — figures are correct as at 12 January 2026, so check current rules at ird.govt.nz. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 12 January 2026.