Has National just proposed a better future for KiwiSaver?

Tuesday, 25 November 2025

Prime Minister Christopher Luxon announced more KiwiSaver tweaks by National.

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EXPLAINER: Auckland pensions expert Robert MacCulloch says National’s unexpected U-turn on KiwiSaver “lacks substance” and is a rushed political response to the growing alignment of NZ First and Labour on pensions policy, the Regulatory Standard Bill, and asset sales.

Prime Minister Christopher Luxon was also wrong to liken National’s proposed KiwiSaver reforms to Australian superannuation, MacCulloch said.

Unlike Australian prime minister Paul Keating’s reforms in the early 1990s, MacCulloch said Luxon’s plan to lift “default” contribution rates progressively to 6% by 2032 was “not part of a proper package”.

Keating’s changes were designed to make retirement more comfortable for everyone, and involved three things Luxon had not spoken about: Compulsion, means-testing of state pensions, and tax reductions for companies to help pay for the contributions they would make.

By contrast, Luxon was proposing lifting “default” contributions, which would do nothing for lower-income workers who could not afford to contribute, and people whose employers used the “total remuneration” loophole to avoid making KiwiSaver employer contributions.

National has kicked off its election campaign with a party promise to pull Kiwisaver contribution rates up to Australia levels.

“National were in a panic that NZ First might go with Labour, and they made this panic announcement to offset that political threat,” MacCulloch said.

National’s big KiwiSaver change was “to change a rule”, which was not part of a larger, joined up pensions plan.

What is the “default” contribution rule?

It is not a minimum contribution rate.

Employees will be able to “opt out” of participating in KiwiSaver or contribute at a lower rate, if they choose.

The minimum contribution rate for those who participate would remain at 3%.

“All else being equal, doubling contributions will double a person’s KiwiSaver balance at retirement,” National said.

A 21-year-old earning $65,000 per year making default contributions in line with the Changes could expect to have around $1.4 million at retirement, it said.

The taxpayer-funded Sorted website has calculators that individuals can use to calculate what they and their employers’ increasing their contributions would mean for them.

Should savers get advice?

If National’s policy came to pass, workers would be effectively invited to put more into a scheme that locks their money up until they hit 65 (or whatever age the KiwiSaver Act is amended to say) with smaller government contributions than there used to be.

Financial planner Paul Sewell, who is on the board of Financial Advice NZ, said the organisation would recommend people seek professional advice.

But there were just under 3.5 million people with KiwiSaver accounts.

Sewell said that barring total remuneration, people whose employers were contributing would effectively get a pay rise from the increase to 6% matching contributions.

It would be hard for every one of the nearly 3.5 million people with a KiwiSaver account to get advice.

“That’s an additional 2% your employer puts in,” he said.

How big a U-turn is this for National?

National’s KiwiSaver about-face was nothing short of “spectacular”, according to Sam Stubbs, chief executive of Simplicity.

“And a decade too late”.

KiwiSaver was Labour’s baby, created in 2006, but successive National governments cut it.

The first cut came in 2009, when a National government cut the minimum contribution from 4% to 2% (which was partially reversed in 2013), abolished the member fee subsidy of $40 per saver and ended the KiwiSaver employer tax credit saying it would make KiwiSaver “more affordable for members, employers and taxpayers”.

However, in an early move, National also created what Labour called “loopholes” that allowed employers to strike individual agreements with employees under which they could deduct their employer contributions from those employees’ salaries. These were known as “total remuneration” policies.

The second cut came in 2012, when National halved the government contribution to 50c for every $1 contributed to a maximum of $521 per year, down from $1040 per year.

The third cut came in 2015, when the $1000 kickstarter for people opening accounts was removed.

The fourth came in Budget 2025, when once again a National-led government halved the maximum government contribution from $521 per year to $260.72.

Will compulsion and NZ Super means-testing come?

Simplicity chief executive Sam Stubbs says the important thing about Luxon’s announcement is that ‘National has just done a U-turn from being the biggest detractors of KiwiSaver to the greatest supporters’.

Stubbs believes both are inevitable, potentially casting National’s announcement in a longer-term, more strategic light.

National went into the last election saying it would leave NZ Super age at 65 until 2044, when it will be gradually lifted to 67, a change that wouldn’t affect anyone born before 1979.

Coalition politics ruled that out in the short-term as NZ First would not agree, siding with Labour that the age of NZ Super should remain at 65.

Stubbs said the NZ Super status quo could not continue as the population aged.

“By 2050, the entire income tax take would be spent on NZ Super and healthcare,” he said.

That cry has been sounding for more than a decade, but in recent months it has been getting louder.

Last week Simon Power, a former National Party minister and now chief executive of KiwiSaver provider Fisher Funds, gave a speech to business leaders lamenting the 50th anniversary of the abolition of compulsory superannuation by prime minister Robert Muldoon.

“I asked our investment team what that scheme might be worth had it survived. Their high level estimate, allowing for withdrawals after 40 years, was in the ballpark of $700 billion.”

Power said: “We are living longer and having fewer children. That means more people than ever will be relying on NZ Super, and at the same time there will be fewer people paying taxes to fund it.

“The dependency ratio is inverse to our requirements. In the 1960s around seven people were in the middle of their lives paying taxes for every person over 65. Today, there are four people. In 2065, Treasury suggests this might be halved to two people.”

Struan Little, chief strategist at Treasury, while speaking at a tax conference last week sounded a grave warning: “Keeping the cost of NZ Super stable as a percentage of GDP would require lifting the age of eligibility to 72 by 2065, and that’s not to mention the rising cost of healthcare and other expenditure. Relying on tax changes alone, the GST rate would have to increase to 32% to fund the projected increase in expenditure.

“A multi-pronged approach will therefore be essential, and the sooner New Zealand can act, the smaller the adjustments we will likely need.”

Stubbs believed compulsion would come, and the total remuneration loophole would inevitably have to be closed.

What do businesses think?

Businessman Corry Tierney, part-owner of Mercury IT, said media outlets were quoting fund managers supporting National’s plan.

Those were the same fund managers who stood to gain from people saving more into their KiwiSaver schemes, he said.

But, the plan would come at a cost to businesses, especially if total remuneration was banned.

“This impacts employers,” he said.

“It just eats our margins and capability to do business,” he said.