KiwiSaver reinforced as our path to prosperity, now let’s make it compulsory

Sunday, 8 June 2025

Sam Stubbs is the managing director of KiwiSaver fund Simplicity.

OPINION: When it comes to encouraging Kiwis to save for their retirement, the National party does not have a stellar record.

It goes back to Rob Muldoon, who dismantled the fledging retirement savings scheme set up by the previous Labour government. In perhaps the most effective political advertising of all time, Muldoon’s then-opposition party portrayed the scheme as communism, with a dancing cossacks theme.

Once elected, Muldoon’s government then replaced Labour's voluntary contribution scheme with national super. Ironically, the scheme was much more a socialist construct than the Labour savings scheme. But a retirement savings scheme it was not.

Then Labour succeeded in getting a savings scheme to stick, with the Clark/Cullen government establishing KiwiSaver in 2009. But since then, successive National-led governments have had a pretty dismal record of chipping away at it.

They cut the $1000 kick-start payment, lowered contributions from 4% to 3%, and have now twice lowered the member tax credit to 25% of its original level. Why? Because not only was KiwiSaver a Labour initiative, but many in National thought it took money away from investing in Kiwis’ favourite asset, investment property.

But KiwiSaver has to succeed because it is becoming obvious that national super, in its current form, is becoming unaffordable. Payments are now $25 billion a year, consuming 20% of all taxes.

By 2060, the Treasury predicts it will rise to 27% of taxes. And all those extra billions on national super payments mean less for schools, hospitals roads and police. Given this reality, eventually, the age of retirement will have to rise and/or national super payments reduced.

So it is encouraging to see Nicola Willis saying she is considering raising the age of eligibility for national super. This is an honest approach to a fiscal reality. And it is in contrast to past positioning by both political parties, who have kicked the can down the road.

In Budget 2025, recently announced, National’s approach to retirement affordability has further improved. By raising KiwiSaver contribution rates from 3% to 4% in the Budget, the Government is effectively admitting that KiwiSaver is the best way to save for retirement. It’s a major admission of KiwiSaver’s success, from the political party that hasn’t - until now - been a fan.

But listening to many Budget commentators, you wouldn’t believe it. By focusing on the removal of KiwiSaver incentives - an easy target in an austerity Budget - they missed the key issue, ie, that National is now a fan of KiwiSaver growing too. And given it will be the biggest source of funding for the infrastructure we need, support for KiwiSaver from both sides of the House is a bouquet for New Zealand’s future prosperity. Bravo.

Let’s not forget that the announcement to increased contribution rates would not have been without internal opposition. ACT still believes that people will act with knowledge and foresight when saving for their retirement. There is plenty of evidence that this is not the case - for example, the rest of the developed world, nearly all of whom have compulsory or default retirement schemes. But ACT has an ideology, and it does not support what it would call nanny state compulsion.

However, there was a brickbat in the Budget too, because the Government has not gone the one step further that many - including myself - believe it should, to compulsory KiwiSaver.

Why didn’t they? The logic goes that because we have universal national super, we do not need to have either compulsory KiwiSaver, or contribution rates as high as Australia. And there is some truth to this. National super puts a floor under old-age poverty in New Zealand, and is something which defines us as a caring society.

But to continue to pretend that national super will do the heavy lifting of keeping Kiwis comfortable in retirement is fiction. It will simply cost too much. And if KiwiSaver remains voluntary, the poorest in society will continue to opt out, only to be even poorer when they retire. They will then have nothing other than national super, which is already not enough for most to live on. This is not the New Zealand we should want.

So, either way, the Government deserves a Budget bouquet for - finally - acknowledging KiwiSaver as a path to prosperity for all New Zealanders. They have effectively admitted that Labour were right to introduce it, and have, in a sense, now de-politicised its existence. With 3.5 million members and growing, KiwiSaver is now too big to fail.

But a cross-party consensus on KiwiSaver is required, because we all deserve a predictable long-term environment in which to save. And KiwiSaver should be made compulsory because those who aren’t saving now are the ones who will most need it.

Nothing should be surer than death, taxes and, thankfully, KiwiSaver.

What do you think? Email sundayletters@stuff.co.nz. Please include your full name and address.