Temporary 3% KiwiSaver Reduction
A temporary 3% KiwiSaver reduction is the official way to keep wage deductions at 3% after the default rose to 3.5%. You apply to Inland Revenue. You do not tick 3% on a KS2.
It lasts 3 months to a year. Then payroll goes back to 3.5% unless you apply again. Your employer must drop your deduction to 3% once they have the letter. Dropping their own 3.5% to match is optional.
Use case: Dunedin warehouse Ltd
Situation: a labelled example. Sam works two PAYE jobs. One payroll already deducts 3.5%. The weekend job still has not seen a letter. KiwiSaver: Sam applies in myIR, then chooses which employer to show the notice to. Inland Revenue lets you pick when you have more than one employer. The second job keeps 3.5% until that employer has the letter. Action: keep the notice. If Sam changes jobs, show it again or deductions restart at 3.5%.
What is a temporary 3% KiwiSaver reduction?
Inland Revenue’s temporary rate reduction page lets you lower your KiwiSaver contribution rate to 3% for 3 months to a year. The KS2 menu on changing my KiwiSaver contribution rate is 3.5%, 4%, 6%, 8% or 10%. 3% on wages only comes through this notice. The default 3.5% rate from 1 April 2026, and the 4% step from 1 April 2028, sit on the KiwiSaver hub.
Inland Revenue opened applications from 1 February 2026. A reduction could not take effect before the first pay day on or after 1 April 2026. You can now apply at any time. You do not need to wait for a current reduction to end. You can take them back to back.
| Check | Can you use a temporary 3% reduction? |
|---|---|
| Employee on salary or wages, want 3% instead of 3.5% or higher | Yes. Apply in myIR (or call, or send a web message) |
| Already have a savings suspension | No. Inland Revenue will not accept a reduction while a suspension is active |
| Want 4%, 6%, 8% or 10% | Do not use a reduction. Tell the employer on a KS2, in writing, through the provider, or in myIR |
| More than one employer | Yes. You choose which employer gets the notice |
| Self employed with no PAYE wages | This 3% payroll tool does not set your provider payments. Agree the amount with the scheme |
| Standard KS2 change in the last 3 months | A KS2 rate change is once every 3 months unless the employer agrees to a shorter gap. A reduction is a separate Inland Revenue notice |
How do I apply in myIR?
Log into myIR and open the KiwiSaver account panel on the homepage. That is Inland Revenue’s listed path. If you cannot use the panel, call Inland Revenue or send a web message in myIR asking to apply for a temporary rate reduction.
Apply
myIR KiwiSaver panel, or a call, or a web message
Letter
Acceptance letter with start and end dates. Show it to payroll
Next pay
Employer deducts 3% from the next pay after they have the notice
Keep the notice. Print a copy from myIR if you lose it, or ask Inland Revenue to reissue it. If you asked Inland Revenue to tell the employer, they send that notification as well.
Watch the end date. Inland Revenue writes within 30 days of the end date. If you do not apply again, they ask the employer to start 3.5% deductions again.
Change jobs, show it again. A new employer will not know unless you hand over the letter.
Stop early if you want. Talk to your employer. A KS2 that picks 3.5%, 4%, 6%, 8% or 10% ends the reduction for that employer. To go back to 3% with the same employer, reapply and get a new certificate.
Two traps that mix people up
You cannot apply if you have a savings suspension. A suspension stops wage deductions. A reduction keeps 3% coming out.
Your employer is not automatically required to pay only 3%. Inland Revenue: they must lower your employee deduction to 3%. They can choose to match 3% on their side. The compulsory employer minimum stays 3.5% unless they make that choice. When you move up again, they must lift compulsory employer contributions to at least 3.5%.
What does 3% look like on one pay?
The employee line is 3% of that pay’s gross KiwiSaver pay, not 3.5%. To see PAYE, ACC, and KiwiSaver together, run the same wage through the PAYE calculator at 3% and at 3.5%.
Labelled example: $1,000 gross pay
Employee at 3.5% default: $1,000 × 3.5% = $35.00
Employee on a temporary reduction: $1,000 × 3% = $30.00
Employer stays at 3.5% ($35.00 before ESCT) unless they choose to match 3% ($30.00 before ESCT).
This $1,000 figure is a labelled example applying Inland Revenue’s published percentages. It is not an Inland Revenue worked example.
Pull highlight: Inland Revenue will still contribute 25 cents for each dollar of your own money, up to $260.72, if you meet the other tests. To get the maximum you must put in at least $1,042.86 of your own money between 1 July and 30 June. A lower wage deduction can leave a gap. You can top up by 30 June through salary deductions, a payment to Inland Revenue, or a payment to the provider. Source: Inland Revenue getting the KiwiSaver government contribution.
What should payroll do with the letter?
Inland Revenue tells employers to lower the employee deduction to 3% when they get a temporary rate reduction letter from the employee or from Inland Revenue. Keep the letter on file. Do not send it to Inland Revenue. Apply the 3% from the employee’s next pay. Filing those amounts with employment information sits on payday filing for small employers.
Business.govt.nz KiwiSaver repeats the same split: you can choose to match the reduced employee rate, and when the employee moves up you lift employer contributions to at least 3.5%, or to any higher rate you have chosen. Keep KiwiSaver records, including contribution rates, for seven years.
| Payroll event | Employee deduction | Employer contribution |
|---|---|---|
| Valid reduction letter on file | Must be 3% | May stay 3.5%, or you may match 3% |
| Reduction ends and no new letter | Back to 3.5% default (Inland Revenue asks you to restart) | At least 3.5% compulsory |
| Employee hands over a KS2 at 4%, 6%, 8% or 10% | Use the KS2 rate from the next pay | At least 3.5% (the KS2 ends the reduction) |
Sources: Inland Revenue update employee KiwiSaver deduction rate, KiwiSaver deductions from employee pay, and changes to the KiwiSaver contribution rate (20 January 2026).
What people get stuck on
r/PersonalFinanceNZ and r/LegalAdviceNZ threads mix a reduction with a savings suspension, then ask the employer to pay the 3.5% as extra wages. Inland Revenue: on a suspension you will not get employer contributions unless the employment agreement says otherwise. A reduction is the tool that keeps 3% coming out of pay. Job ads that still quote 3% employer KiwiSaver are behind the 3.5% minimum unless a valid reduction is in place and the employer has chosen to match 3%.
Provider pages sometimes say the employer will only be required to contribute 3% during a reduction. That is not how Inland Revenue writes the employer rule. Matching 3% is a choice. Compulsory employer contributions are 3.5% of gross unless that choice is made. Smiths style “change your KS2 as often as you like” also misses Inland Revenue’s 3 month gap for ordinary KS2 rate changes, unless the employer agrees to a shorter timeframe.
Frequently asked questions
How do I apply for a temporary 3% KiwiSaver reduction?
Log into myIR, open the KiwiSaver account panel on the homepage, and apply. Inland Revenue also lets you call or send a web message in myIR. You get an acceptance letter with start and end dates. Show it to your employer so the next pay deducts 3%.
Does my employer have to drop their KiwiSaver contribution to 3% as well?
No. Inland Revenue says the employer must lower your employee deduction to 3% once they have the notice. Matching 3% on the employer side is their choice. When you move back up, they must lift compulsory employer contributions to at least 3.5%.
Can I hold a temporary 3% KiwiSaver reduction and a savings suspension together?
No. Inland Revenue will not let you apply for a temporary rate reduction if you already have a savings suspension. A suspension stops wage deductions and usually stops employer contributions. A reduction keeps you contributing, at 3%.