PIR Too High? On 28% but Earn Less? You May Be Overpaying KiwiSaver Tax (NZ, 2026)

If you defaulted to the 28% PIR but earn less than the thresholds, you are overpaying tax on your KiwiSaver. Here is the dollar gap, how the IRD square-up refunds you, and how to fix your rate in minutes.

Your Prescribed Investor Rate (PIR) is the tax rate applied to the income your KiwiSaver or other PIE fund earns. Get it right and KiwiSaver tax disappears quietly in the background. Get it too high — and a great many Kiwis sit on the 28% default without knowing it — and you hand IRD more tax than you legally owe, year after year, on money you are saving for retirement.

This guide shows you the exact dollar gap, who is most exposed, how the end-of-year square-up works, and how to lower your rate with your provider in a few minutes.

TL;DR: If your taxable income is $53,500 or less you should not be on the 28% PIR — the default rate. On 28% when you should be on 10.5%, you overpay $175 of tax for every $1,000 of KiwiSaver income; on 28% when you should be on 17.5%, the gap is $105 per $1,000. Since the 2021 tax year IRD's automatic square-up refunds the overpayment, but only once you fix the rate going forward.

Why are so many Kiwis stuck on the 28% default PIR?

The 28% rate is the default, not a considered choice. If you never notify your provider of a PIR — and they hold your IRD number — your KiwiSaver income is taxed at the top rate of 28%. If your provider has no IRD number on file, the highest rate is applied too ¹.

That catches more people than you would think. You opened your KiwiSaver as a student or a first job, ticked nothing, and the rate stuck. Or you set it correctly a decade ago, your income dropped after kids or a move to part-time work, and nobody told the rate to follow you down. PIE income is normally excluded income that never appears on your tax return when the right rate is used ¹² — so there is no obvious annual prompt forcing you to check.

The 2025/26 thresholds also moved. They rose to align with the new personal tax brackets, lifting from the old $14,000 / $48,000 / $70,000 figures ⁴. If you last set your PIR before 1 April 2025, the bands you were comparing yourself against no longer exist.

What PIR should I be on? The 2026 thresholds

Your PIR is set by your taxable income and your taxable income plus PIE income across the last two income years. You use the lower of the two years — so a recent income drop genuinely lowers your rate ⁵.

Sources: IRD ², Generate ³, NZ Defence Force Savings ⁴.

If both your taxable income and your combined income sit under the relevant ceilings, 28% is too high for you. A common error is someone on around $45,000 — squarely a 17.5% earner — defaulted to 28%.

Is my PIR too high?

Is my PIR too high? In short: if your taxable income in the lower of your last two income years was $53,500 or less, and your taxable income plus PIE income was $78,100 or less, then 28% is too high — you belong on 17.5%, and on 10.5% if your taxable income was $15,600 or less ²⁵.

How does a PIR that's too high overpay your tax?

PIE income is taxed at a final flat rate when your PIR is correct, and it stays out of your normal tax calculation ¹². The catch: if the rate is wrong, the wrong amount of tax comes out of your fund and reduces what compounds for you.

There is a genuine reason the system runs this way. The PIR is capped at 28% even for people whose marginal income tax rate is 30%, 33% or 39% — so high earners pay less tax inside a PIE than on ordinary income ⁹. That cap is a feature for them. But it is exactly why a lower earner left on 28% loses out: you are paying the high earner's capped rate instead of your own entitled rate. If you should be on 17.5% but sit on 28%, that is 10.5 cents in extra tax on every dollar of PIE income; if you should be on 10.5%, it is 17.5 cents in the dollar.

How much could you be overpaying? (worked example)

Figure — Overpaying at 28%: 10.5% vs 28% on $1,000 of PIE income

The same $1,000 of attributed KiwiSaver income, two rates:

Source: IRD PIR rates 2025/26 ²⁸.

For the more common reader — a 17.5% earner left on 28% — the gap is $105 per $1,000 of PIE income.

Scale that up. On $2,000 of PIE income in a year — a realistic figure for a mid-sized balance in a decent year — being on 28% when you should be on 10.5% overpays 17.5% × $2,000 = $350. Being on 28% when you should be on 17.5% overpays 10.5% × $2,000 = $210 ⁸.

Worked example: Mel, part-time, $42,000

Scenario: Mel works part-time, taxable income $42,000. She opened her KiwiSaver at 19 and never set a PIR, so she is on 28%. Her balanced fund attributes $1,800 of income to her this year.

Mel is over-set by one band. At $189 a year, left unfixed across a decade of contributions that is real money quietly leaving a retirement account — and that is before the compounding she never sees on it.

By the way, the same year-end logic that flags an over-set PIR also flags whether Mel is getting her full KiwiSaver government contribution. After Budget 2025 that match was halved to 25 cents per $1, up to a maximum of $260.72, needing a $1,042.86 member contribution to max out ¹⁰¹¹. Settings rarely sit in isolation.

Will IRD automatically refund you — and how the square-up works

Mostly, yes — and this is recent. Refunds of overpaid PIE tax only became possible from the 2021 tax year. Before that, any overpaid tax on PIE income was final and there was no refund ⁷. So if you have been on the wrong rate for years, the refundable portion is the more recent years, not the whole history.

Here is the end-of-year PIE square-up, run automatically by IRD ⁶:

• IRD compares the tax actually deducted at your PIR against the tax due at your correct rate for the year.
• If you overpaid, you get a PIE credit. It is first used to reduce any income tax you owe; any remaining credit is refunded to you.
• If you underpaid (the rate was too low), a PIE debt is added to your tax to pay.
• For NZ-resident individuals this adjustment is automatic at year-end — Fisher Funds confirms IRD adjusts over- or underpaid PIE tax for you ¹².

A caution at the top end: if your residual income tax tips over $5,000, you can be pulled into provisional tax ⁶. That is a high-earner concern, not a part-timer one, but worth knowing.

The square-up refunds the past. It does not fix the future — your provider keeps deducting at 28% until you change the rate. That is the step people miss.

How to lower your PIR with your provider (step by step)

It takes minutes and you do not need an accountant. Find your correct band in the table above, then update it directly. Provider phone numbers and app paths below were verified as at 16 June 2026; an em-dash in the Phone column means that provider is app- or online-only and takes PIR changes there rather than over a dedicated line.

Sources: provider help pages (see Provider sources below).

Two things worth flagging. First, joint investments take the higher PIR of the holders — ANZ confirms this ¹ — so check joint accounts separately. Second, providers must apply 28% if they hold no IRD number and/or PIR for you ¹; supplying your IRD number is often half the fix. SuperLife and Smiths both recommend a quick PIR check once a year.

Not sure which band you land in once you net off study income, parental leave or a part-year salary? Our KiwiSaver Health Check tool walks you through it, or book a KiwiSaver review and we will read it off your statements with you.

Who is most at risk of an over-set PIR?

Because the rate is fixed on your lowest taxable income across the last two years ¹³, anyone whose income recently dropped is a prime candidate — and these are precisely the people least likely to have updated it.

• Students and recent grads. Opened KiwiSaver young, never set a rate, low or no taxable income — many qualify for 10.5% but sit on 28%. Mercer notes most children in its scheme qualify for the lowest 10.5% PIR (see Provider sources below).
• Part-timers. A $35,000–$50,000 part-time salary is a 17.5% earner stuck on 28% more often than not.
• Parents on leave. A year of parental leave can drop your taxable income enough to pull your PIR to 17.5% or even 10.5% — and the rate can legitimately stay there for two years even as you ramp back up.
• Retirees. Wound back from full-time work to NZ Super plus a little income? Your taxable income may now sit in the 10.5% or 17.5% band while your KiwiSaver still draws tax at 28%.

A common case is someone recently returned from parental leave: income legitimately lets the PIR sit at 17.5%, but the provider was never told, so 28% has kept running.

Your PIR fix checklist

1. Find your taxable income for each of the last two tax years (your IRD income summary or end-of-year statement).

2. Take the lower year and read your band off the 2026 table above ⁵.

3. Log in to your provider and update the PIR using the steps above.

4. Confirm your IRD number is on file — without it you are stuck on 28% regardless ¹.

5. Check joint accounts separately — they default to the higher holder's rate.

6. Let the square-up do the rest — IRD refunds overpayments back to the 2021 tax year automatically ⁶⁷.

7. Diarise an annual check — incomes move; the right PIR moves with them.

Small settings, real dollars

A PIR is a single dropdown. Left wrong, it skims $175 per $1,000 of fund income off your retirement balance — and $105 per $1,000 for a 17.5% earner left on 28%. There is no product to fix it; the fix is reading your numbers, setting the rate right, and checking the government contribution and your contribution rate at the same time.

Frequently asked questions

Is the 28% PIR too high for me? If your taxable income was $53,500 or less in the lower of your last two income years, and your taxable income plus PIE income was $78,100 or less, then yes — you should be on 17.5% or 10.5%, not 28% ²³⁴. The 28% rate is only correct for taxable income of $53,501+ or combined income of $78,101+ ⁴.

Will IRD refund the KiwiSaver tax I overpaid? Yes, since the 2021 tax year. At the automatic end-of-year square-up, an overpayment becomes a PIE credit that first reduces any income tax you owe, with the remainder refunded ⁶. Overpaid PIE tax before the 2021 year was final and cannot be refunded ⁷.

Does fixing my PIR backdate automatically, or only fix the future? The IRD square-up handles past overpayments automatically ⁶. But your provider keeps deducting at the old rate until you change it — so you must update the PIR yourself to stop overpaying going forward.

How is my PIR worked out if my income changed? It uses your income across the last two income years, and you take the lower year ⁵. So a recent drop from parental leave, study, part-time work or retirement can legitimately lower your PIR to 17.5% or 10.5% — even if your current-year income later rises ¹³.

What happens to my joint KiwiSaver or investment account? Joint accounts apply the higher PIR of the holders — ANZ confirms this ¹. Check joint accounts separately from your individual KiwiSaver.

How much do I overpay on 28% when I should be on 17.5%? You overpay the 10.5% difference. On $1,000 of PIE income that is $105; on $2,000 it is $210 ⁸. Against the 10.5% rate the gap is wider — $175 per $1,000.

General information, not personalised financial advice. Seek advice tailored to your situation before acting. 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 16 June 2026.