KiwiSaver contributions will increase on 1 April. There could be unintended consequences

Wednesday, 25 March 2026

Increasing KiwiSaver contribution rates alone won’t be the silver bullet that we’re hoping for when it comes to our retirement woes.

Under the National-led Government our KiwiSaver contributions will increase to 3.5% (for both employers and employees) in April and then to 4% in 2028, but data from wealth app Sharesies shows this won’t secure a great retirement for everyone.

The findings show that even if our contribution rates increased to 12% (6% from both the employer and employee) as planned by the National Party by 2032, about four in ten Kiwis will still fall short of what’s needed for a no-frills retirement (a relatively basic retirement with few treats).

Sharesies ran the numbers on the anonymised data of 8,700 real KiwiSaver customers to see how they would measure up against the latest Massey University Retirement Expenditure Guidelines.

These guidelines indicate how much money a Kiwi family would need for a retirement period, running from 65 to 90. According to Massey, a single person would require $705 for a no-frills retirement or $790 for one with choices. A couple would require $937 for no frills and $1780 for choices.

At the current contribution rate of 3% (matched by the employer’s 3%), nearly half (49%) of KiwiSaver members won’t have enough money at retirement to have a no-frills income (including the $538 a week NZ Super payment).

That drops to 46% when you bump the contribution up to 4% (plus the employer’s 4%), and still sits uncomfortably high at 41% even when contribution rates are boosted to 6% (plus the employer’s 6%).

Matt Macpherson, the head of of KiwiSaver at Sharesies, says the “Government needs to be commended for raising contribution rates,” but we also need to remain cognisant of how this will impact individual KiwiSaver members.

“Rising contributions mainly benefit those who can already afford it,” he says.

And this applies even to younger people who have the time for their savings to compound.

Because KiwiSaver is reliant on percentage-based contributions, the higher your salary, the more you end up contributing over time – and the more that compounds by retirement.

“This creates a long tail of wealth for those who are already comfortable,” says Macpherson, pointing out that the system can cement inequality and different outcomes for Kiwi retirees.

The contribution conundrum

We already have 1.5 million people not contributing to KiwiSaver at all, and 65% of those contributing only allocate the bare minimum 3%.

The general consensus among politicians and experts today is that we need to increase our contribution rates to lessen our reliance on superannuation.

But if we push too hard and too quickly with contribution increase, we could risk losing Kiwis – not because they don’t want to save for retirement, but because they feel that they can’t afford it.

This financial breaking point mirrors trends seen in public health. Decades of data show that pricing is the single most effective tool to curb smoking; for every 10% price hike in price, cigarette use in high-income countries drops by roughly 4%.

This logic doesn’t just apply to vices. When the 'price' of future security – in the form of voluntary KiwiSaver contributions – competes with immediate survival, families feeling the strain of inflation and high mortgages may be forced to 'quit' saving.

Sophia Blair, a researcher at insights firm TRA, says this is further complicated by the so-called “immediacy bias,” which makes it difficult for us to even picture what the future might look like. Our future selves feel abstract and far-removed, while our desire for a treat or spoiling the kids is a tangible feeling today.

As we move to increase KiwiSaver contributions, we need to take care to ensure that more people don’t opt out as they look to prioritise their immediate needs over what they might need in the future.

Macpherson says that with contribution rates now increasing, it’s likely more people will opt out due to affordability.

“Raising contributions is really positive for a lot of New Zealanders, but also risks shutting out those who need the savings most,” says Macpherson.

So what’s the right amount to contribute?

Murray Harris, the head of KiwiSaver at Milford, says that no retirement system is perfect and there’s still enormous value in contributing as much as you can.

Harris says that “if you stop contributing, you’re not going to save anything,” leading to even worse outcomes down the line.

He’d like to see the KiwiSaver system evolve over time to ensure that no one is left behind.

“Compulsion is a feature of the most successful superannuation systems in the world,” he says, adding that he’d also like to see the tax incentives change so that Kiwis are given a viable reason for locking away their money until retirement.

The other insight that stands out in the Sharesies data is how reliant many of us will still be on NZ Super payments in the future. Any changes to Super settings will have to carefully consider how it affects New Zealanders – particularly those who haven’t been able to save as much as the wealthier individuals in our society.

'Any future changes to New Zealand Super need to be signalled far, far in advance – 15, maybe 20 years – so people can adjust,” says Harris.

“New Zealand Super is only there to provide a basic living; it’s not there to fund your retirement. If you want travel and a social life, you need to provision that on top privately.”

The nature of KiwiSaver, the cost of superannuation, and the relationship between these two arms of our retirement system are all up for debate right now. Striking a balance between the two will be the defining challenge in ensuring New Zealanders can retire with dignity.

So what’s your view on this? How should NZ Super evolve? Is it time for means-testing to ensure the benefit is given only to those who need it most? Let us know in the comments section below.