Taupo KiwiSaver Joanne Harding believes many fellow KiwiSavers are being overtaxed on their growing retirement nest eggs.

To her horror, Harding, who is a saver with Mercer, discovered that her KiwiSaver account was being taxed at 28 per cent.

That is the rate that should be charged to higher income earners, which Harding is not.

She took to Facebook to find out if others were aware that unless they had told their KiwiSaver provider what tax rate to put them on, they would default to 28 per cent.

"Probably 80 per cent of people on my friends list didn't know," she said.

How many might that equate to across the whole of New Zealand?

"A hell of a lot," Harding says.

Confusingly, KiwiSaver tax rates (known as the Prescribed Investor Rate, or PIR) are different from ordinary income tax rates. There are three tax rates of 10.5 per cent, 17.5 per cent, and 28 per cent, and the rate each KiwiSaver should pay depends not only on their current income, but on income in the previous two years.

Harding said she could not understand how the Government came to set the default KiwiSaver tax rate so high, and she felt that not enough was being done by scheme providers to alert people to the risk of KiwiSaver over-taxation.

"I am a bit concerned for the New Zealand population who are investing with the KiwiSaver scheme. I feel they are unaware at what tax rate the IRD are taking from their contributions. I have just found out yesterday after 5-6 years of investing for my future that the default tax rate they have me at is 28 per cent," she said in a message to stuff.co.nz

"I have never been lucky enough to be on this higher tax bracket and would say that a huge percentage of this country and workforce are in the same boat. I feel like it is my personal duty to inform other members of the public that unless you change it yourself over the phone with your provider for KiwiSaver it will stay the same. IRD will not reimburse you."

Debbie Martin told stuff.co.nz in a message: "I have just found out today that my kiwisaver has been taxed by the government at 28 per cent which is the default amount and not the 17 per cent that you have to ring and request. I am pretty sure, like most of my friends that not a lot of kiwis are aware of this."

In a statement Mercer said it reminded KiwiSavers to check their PIR's at least twice a year, once by post and once by email, though its periodic newsletters also regularly touched on the subject. Annual account statements sent out in May or June show the PIR rate, and in its annual reports in September each year it also reminds members to review and change their PIR if needed.

"New default members also get an investment statement and a letter which includes their default PIR and reminds them to check it," Mercer said.

"Mercer understand that this is an area of concern for members," it said.

Inland Revenue said it does not know how many people were on the wrong tax rate.

Last year the department said: "If the members does not give the PIR rate to the provider then they will be taxed at the highest rate of 28 per cent. PIR rates are based on your income tax for the year. It would not be possible for us to know who is on the wrong rate as it is supplied to the provider not to IRD."

AMP, the third largest KiwiSaver provider, which has $3.6 billion in KiwiSaver funds under management, said people who have been on the wrong tax rate could not claim back overpayments. All they could do was contact their scheme provider and switch onto the right tax rate.