PIR explained. and why most Kiwis pay too much KiwiSaver tax

About a third of NZ KiwiSaver members are on the wrong PIR. Most of them are overpaying. Since 1 April 2020 IRD refunds overpaid PIE tax in its end-of-year square-up, so the money isn't lost forever. but it spends the year out of your fund, not compounding, like an interest-free loan to IRD of $200-$500 a year.

The fix takes 60 seconds. Here's what PIR is, why it goes wrong, and how to set it right.

What PIR actually is

Prescribed Investor Rate is the tax rate on your KiwiSaver fund's returns. Three rates exist: 10.5%, 17.5%, and 28%. The right one for you is set by your income. not by what your fund manager assumes.

Which rate are you on?

These are the thresholds that apply from 1 April 2025. You can use either of your last two income years. whichever gives you the lower rate.

• 10.5%. if your taxable income was at or below $15,600, AND your combined income (taxable + PIE) was at or below $53,500.
• 17.5%. if your taxable income was at or below $53,500, AND your combined income (taxable + PIE) was at or below $78,100.
• 28%. everyone else.

The trap: when you join KiwiSaver, providers default you to 28% if they're unsure. Many people earning $50k stay on 28% for years when they should be on 17.5%. That's overpaying tax during the year for no reason.

What it costs you

If you're on a 5% post-fee return on a $60k balance, that's $3,000 in returns per year. The tax difference between 28% and 17.5% is 10.5 percentage points. about $315/year extra deducted from your fund.

IRD now refunds that overpayment in its end-of-year square-up (a rule change from 1 April 2020). but the refund comes back to you as cash, months later, instead of compounding inside your fund all year. Fixing the rate keeps the money working from day one.

How to fix it

Either:

• Log into your KiwiSaver provider's portal and update your PIR yourself, OR
• Update it via myIR (IRD), which pushes the change to your provider.

Run our free PIR Checker first. three quick questions and we'll tell you the right rate.

One catch

If you've been underpaying PIR (you were on 17.5% but should have been 28%), IRD will square it up at end of year. You'll get a tax bill. Update it now to stop the bleeding.

Source: Inland Revenue, Prescribed Investor Rate (PIR) for KiwiSaver and PIE income (ird.govt.nz). General information only. not personal financial advice.