KiwiSaver Providers Hope Public Support For Contribution Increases Will See Default Rates Move Higher

Scoop

06-06-2025

KiwiSaver providers are hoping public support for increased contribution rates could provide the incentive to push them still higher.
The latest RNZ-Reid Research poll included questions about the changes to the KiwiSaver scheme announced in the Budget.
From 1 April next year, the default contribution rate for employers and employees will rise to 3.5 percent. The following April, it will be 4 percent.
But the government will halve the credit it offers to people who contribute at least $1042 a year to their KiwiSaver, to a maximum $260.72. It will not be available to people earning more than $180,000.
The poll showed a total of 61.2 percent of respondents supported the contribution change, 21.4 percent opposed it and 17.4 percent were not sure.
Among National voters, almost 80 percent supported the change.
But only 23.7 percent of total voters supported the government's move to halve the contribution rate, and fewer than half of National supporters.
Fisher Funds chief investment officer Ashley Gardyne said he was not surprised by the findings.
He said we should not stop at 4 percent plus 4 percent, and should push towards higher contribution rates.
"I think it's really positive we've seen the contribution rates increase, and ultimately if we want people to get to the right amount of savings in retirement those rates do need to move up through time."
He said the Australian model, where contribution rates slowly lifted over a number of years, could be one to follow.
"They took a really long-term, 10-year approach of increasing contributions by a little bit every year. The reality is it's tough to find extra money in your pay cheque to put into KiwiSaver but it is really important long-term as well to make sure you end up in the right position for retirement.
"Having a long-term vision like that is really important."
Kirk Hope, chief executive of the Financial Services Council, which represents KiwiSaver providers, agreed the results were expected.
"We've known for some time that in terms of contributions those will be relatively well received. Obviously it's a bit tougher if the government contribution is being halved or in some cases removed that's not going to be particularly popular, the key thing is the government continues to contribute something."
He said there should be a bipartisan agreement about a long-term strategy for retirement income.
He said it was also worth discussing other steps the government could take, such as adjusting the tax settings.
"Other changes the government might be able to make to the tax system in the future to continue to incentivise particularly savings and even up the playing field between savings and investment and housing. That's some fundamental shifts in the tax system."
More incentives needed
Ana-Marie Lockyer, chief executive at Pie Funds, said it was good to see that most people supported the contribution increase.
"In terms of the halving of the government contributions we need to acknowledge the government faced some hard choices as a result of the tight fiscal environment. But I believe we should be offering more incentives for Kiwis to save for their retirement, not fewer.
"Reducing the government contribution is more likely to impact the retirement balances of lower income earners - a group who deserve the same opportunities as everyone else."
She said even a reduced contribution of $261 a year could grow to more than $40,000 over a person's working life.
"I think what's more important than the dollar amount of the government contribution is the number of Kiwis who don't receive it, either because they're not eligible or they're not contributing enough.
"While it's a good thing that the government contributions are now available for 16- and 17-year-olds, I think the government missed a trick by not extending it to the increasing number of over-65s who are still working, whether by choice or necessity.
"What's probably more concerning is the thousands of KiwiSavers missing out on the MTC government contribution each year because they're not contributing enough to qualify, leaving millions of dollars on the table.
"So the poll is actually a timely reminder for people to ensure they've contributed at least $1043 by 30 June in order to receive the full government contribution of $521 - before it reduces to $261 next year."
A spokesperson for Finance Minister Nicola Willis said the changes to KiwiSaver were designed to help Kiwis to save more and make the scheme more fiscally sustainable.
"For example, an 18-year-old earning the minimum wage of just under $49,000 a year who invests in a balanced fund can expect to have almost $910,000 in KiwiSaver at age 65. Under the old settings it would have been about $732,000.
"The results are similar for most other people. The Retirement Commissioner estimates the changes will increase retirement savings for about 80 percent of KiwiSaver members."