National wants to make KiwiSaver compulsory and lift contributions to 12 percent by 2032. Providers and economists say affordability for lower-income workers is the central problem — and that doing compulsion and rate increases simultaneously could hurt the people it's designed to help.
National's announcement that it would make KiwiSaver compulsory and lift contribution rates to 12 percent by 2032 has reopened a familiar debate: whether New Zealanders can actually afford to save more, and whether forcing them to do so is the right approach.
The policy, announced by National this week, would automatically enrol children from birth with a $1500 kickstart, require all workers to contribute from mid-2028, and lift the combined employer-employee rate from the current 8 percent to 12 percent over several years. It would also extend employer contributions to people aged 65 and over. The cost is estimated at more than $1 billion over four years.
Rupert Carlyon, founder of Koura Wealth, supported the idea of starting savings early — "it's good to instil saving at an early age, teaching people the value of compounding interest" — but questioned whether lifting employee contributions simultaneously with introducing compulsion was the right approach. People on total remuneration packages, where the employer contribution comes out of a fixed total rather than on top of salary, could see a significant effective pay cut. "If you're going to go to 12 percent over the next few years, that's an extra five percent of salary. That's going to have to come from somewhere," Carlyon said. His view: do one or the other, not both at once.
Simplicity chief economist Shamubeel Eaqub said the coverage problem was not that people were choosing not to save — it was that a persistent group was missing out for structural reasons. "More often than not, it's because they're earning low income, or because they're self-employed and have unstable jobs," he said. "For the bottom 60 percent of incomes, they are going to struggle if they have less take-home pay." Eaqub's preferred model was making employer contributions compulsory while keeping employee contributions voluntary — a distinction he said would remove the income impact without creating hardship. Research commissioned by Simplicity showed support for strengthening KiwiSaver for children and lifting contribution rates, but the compulsion question was more complex.
Dean Anderson, founder of Kernel, was more direct. "If you're on a low income, dollars in hand matters most. Especially if they have any high interest personal debt. Losing 10 percent to 12 percent KiwiSaver is a nice-to-have, but not practical," he said.
One specific feature of the policy also raised questions: the extension of contributions past age 65, combined with no change to the Superannuation qualification age. Anderson noted the apparent tension: "Why is the government now not looking at changing the access age — potentially lowering it to 60 — and then proposing an increase of the access age to superannuation?"
Carlyon also raised an administrative concern: the policy's provision that people could stop contributing if they met hardship withdrawal criteria would be difficult to enforce. "Administratively, that's too hard. That's going to be a nightmare if they're expecting providers and supervisors to do that." That concern echoes a broader debate about contribution rates: a group representing NZ actuaries recently argued that 6 percent combined contributions could be excessive for minimum wage earners, suggesting 5 percent was more appropriate for median earners, per interest.co.nz's reporting.
Whether or not the policy proceeds will depend on the election outcome. The debate, however, reflects a genuine tension in New Zealand's retirement savings landscape: high coverage in principle does not automatically mean high coverage in practice for those least able to absorb additional compulsory costs.
This article is for general information only and is not personalised financial advice. Seek advice from a licensed financial adviser (registered on the FSPR) for guidance specific to your situation.