The huge red flag undermining KiwiSaver. And how a flat white (yes, really) can turn into $200,000
Friday, 6 March 2026
Nearly two-thirds of KiwiSaver members are trudging toward retirement, contributing only the bare legal minimum of 3%.
Combine that with the 1.2 million working-age Kiwis who aren't contributing a cent, and you have a generational headache that will only become more acute with every passing year.
This minimum contribution will increase to 3.5% at the end of this month, but as this data from the Inland Revenue Department shows, we still have work to do when it comes to improving KiwiSaver outcomes.
Less than one in five KiwiSaver participants are contributing 6% or above, despite incremental options being open to anyone in the scheme.
This will cost an entire generation of savers dearly if something isn’t done.
If you had two 30-year-old Kiwis, earning the median wage ($75,816), their retirement nest eggs would quickly diverge based on how much they were contributing (assuming they currently had nothing in their KiwiSaver accounts).
Contributing 3.5% (plus the employer contribution) would lead to $524,500 by retirement.
Contributing 6% (plus the employer contribution) to a growth fund would lead to $722,800 by retirement
That’s $200,000 extra to spend on cruises, holidays, spoiling the kids or essential medical treatment after a lifetime of hard work.
The weekly cost of this is not as much as you might think. Shifting your contributions from 3.5% to 6% would cost $37, moving your weekly take-home pay from $1,099 to $1,062.
To borrow that polarising reference, for the daily cost of a flat white, you could have an additional $200,000 in savings.
The one caveat to note here is that any Kiwis on total remuneration contracts would have to cover their own employer contributions, which impact their take-home pay.
Pushing up contribution rates
Fiona Mackenzie, the managing director of ANZ Investments, says contribution rates have remained stubbornly static since KiwiSaver was first introduced.
'3% or 3.5% or 4% is not going to be enough, and if people aren't contributing through all market cycles over time… then the mission for KiwiSaver is not going to be achieved,' she says.
Young women, in particular, could benefit from increased contribution rates, given the massive retirement gap that’s emerged between men and women living in New Zealand.
Data on gen Z members (those born between 1997 to 2012) from ANZ shows that men have $13,511 in their KiwiSaver on average versus $11,378 for women (a gap of 18.75%). Allowed to compound over time, this gap will only grow larger.
“Typically, we [women] live longer than men, we tend to earn less on average, and we tend to take time for child care responsibilities,” says Mackenzie.
“Those three things combined mean we actually need to retire with more, not less.”
Biology and the economy have handed women a 'longevity penalty,' which sees them living longer on lower wages. To have a decent retirement, women don’t just need to save as much as men; they need to save more.
That said, Mackenzie says the economic headwinds of the last few years have made it difficult for many families, and she understands that saving more might not be possible for everyone right now.
“It’s been very difficult for some time now. We know that when personal and household budgets are stretched, this can be a challenge.”
A behavioural challenge
KiwiSaver’s greatest strength – automation – is also its primary trap. We’ve automated our savings, but we’ve also automated our apathy.
Automation means we contribute every paycheque without thinking about it. But this also means we don’t engage with it sufficiently to make changes that could benefit us in the long run.
Shifting behaviour within an automated system isn’t easy, but it can be done. Indeed, the shift of KiwiSaver members from conservative to growth funds came about from a deliberate educational push focused on teaching Kiwis about the benefits of taking slightly more risk when you have a longer timeline.
Mackenzie thinks something similar will be necessary to shift Kiwis into higher contribution rates in the coming years.
“We need a multi-layered and coordinated approach,” she says.
“It can't just be one KiwiSaver provider. It needs the KiwiSaver industry. And it can't just be the KiwiSaver providers. It has to include corporate employers, who play a really important role here.'
What’s she calling for here is a deliberate effort across the board to ensure that Kiwis buy into higher contributions and see the long-term value.
Fixing the architecture
Dean Anderson, the founder of Kernel Wealth, isn’t convinced that pushing up contribution rates alone will be a silver bullet.
“If 65% of Kiwis are still stuck on that 3% minimum, it’s a red flag that the system is built for inertia rather than actual outcomes,” he says.
“We’ve basically designed a 'set and forget' model where most people have just forgotten – or worse yet, are one of the one million plus Kiwis who have opted out of contributing altogether.”
To Anderson, this is about more than just the percentages. It’s about a structural rethink of how KiwiSaver operates.
Similar to former Mercury Energy chief executive Fraser Whineray, he’d like to see incentives shifted from working-age adults to children. He’d also like “to give self-employed people a reason to care.”
“If we don't fix the behavioural architecture of KiwiSaver now, we’re just kicking a massive fiscal bucket down the road for the next generation to deal with, and it puts more pressure on the government through offsetting via NZ Super.”
So what’s your take on this? What do you think is required to help Kiwis save more for retirement? And do you think our political parties will deliver the changes we need?