Currently, the default position is for employees to contribute 3% of their before-tax pay to their KiwiSaver accounts. They can also contribute 4%, 6%, 8% or 10%, or opt out of making contributions.
Employers must generally contribute the equivalent of at least 3% of their employees’ before-tax pay, provided their employees make contributions to their KiwiSaver accounts too.
In the year to June 2024, employees contributed $6.1 billion to their KiwiSaver accounts, while employers contributed $3.3b.
The Retirement Commission, last year, advised the Government to make 4% the default contribution rate, while retaining 3% as an option.
The Government-funded organisation suggested this would be a good way of getting those who could afford it, to save more, without deterring those who couldn’t from the scheme altogether.
Among other recommendations, the commission said: “We recommend that employer contributions should be required for over 65s and under 18s. In addition, employers could also match employee contributions over 3%.
“We recommend that consideration is given to making employer contributions compulsory for all employee KiwiSaver members, not just for employees who are currently contributing…
“We recommend that the Government contribution is increased for those who do not benefit from an employer matching contribution (e.g. the self-employed).”
The maximum government contribution is just over $521, which is available to all KiwiSaver members who contribute more than $1043 of their own money to the scheme each year.
Speaking to the Herald in December, shortly after he became Secretary to the Treasury, Iain Rennie talked about the need for the Government to better target its spending to help get its books on a more sustainable path forward.
He pointed to the government KiwiSaver contribution as an example of a universal entitlement that could be targeted to those who would benefit from it the most.
The Treasury is worried about the rising costs of health and universal superannuation, associated with New Zealand’s ageing population, putting “chronic pressures on the sustainability of public finances”.
While Willis isn’t going near considering means testing New Zealand Superannuation, she told Newstalk ZB KiwiSaver was an important supplement to universal super for two reasons.
“One, it’s the main tool that heaps of Kiwis use to save for their house deposit. And two, we know that more New Zealanders are going to want more financial security in retirement because not everyone will own their own home at retirement.”
She said she was yet to take proposals regarding KiwiSaver to Cabinet.
Separately, former Commerce and Consumer Affairs Minister Andrew Bayly last year directed the Ministry of Business, Innovation and Employment (MBIE) to consult on making it easier for KiwiSaver providers to invest members’ funds in a broader range of assets.
Currently, most funds are invested in “public” assets, like shares or bonds, that anyone can trade.
However, MBIE has sought feedback on whether rules can be changed to make it easier for providers to invest in “private” assets, like unlisted infrastructure or New Zealand businesses that aren’t listed on the stock exchange.
At the moment, only around 2-3% of KiwiSaver funds are invested in private assets.
MBIE noted that while enabling KiwiSaver providers to diversify their investments had several plus sides, liquidity was the issue.
“KiwiSaver providers would need to commit funds for the long-term (e.g. to a roading project that might take years to provide steady returns), but also have enough funds available to honour members’ requests in the short-term (for example, to make early withdrawals or to transfer to another KiwiSaver provider),” MBIE explained.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
