Hands off our future: Expand, don’t erode, the country’s KiwiSaver scheme
Wednesday, 25 March 2026
Murray Harris is general manager, KiwiSaver and investment funds at Milford Asset Management.
OPINION: KiwiSaver has been a great success for almost 20 years. Working alongside NZ Super, it is a critical piece of the puzzle for robust and affordable retirement savings now and into the future.
More than three million New Zealanders have a KiwiSaver account and more than $140 billion has been accumulated by hard working Kiwis, most contributing alongside their employers to fund their financial security in retirement.
One of KiwiSaver’s success factors has been its clarity of purpose. KiwiSaver is a vehicle to save towards your retirement whilst working, with very limited ability to access those funds other than being in hardship or for a first home - which can be argued is also a significant benefit in retirement.
There has been lots of dialogue in recent weeks about the unaffordability of NZ Super under the current settings. It was the topic of a panel discussion at the recent NZ Economics Forum at Waikato University.
That panel agreed the importance of private savings, in the form of KiwiSaver, working alongside NZ Super in the future to ensure a robust, long-term and affordable retirement system for New Zealand and New Zealanders.
We are not yet a nation of savers. According to economic analyses comparing the 2024/25 economic performance across the OECD, we are 30th out of 32 OECD nations in household savings rankings. KiwiSaver is a fantastic opportunity to improve on this, but we must be disciplined.
The most successful retirement savings systems in the world have strict lock in provisions for good reason, and all have higher contribution rates than KiwiSaver. Whether in economics, business, or sport, we often like to compare ourselves to Australia, which has one of the largest pools of retirement savings in the world at just over $A4 trillion (versus KiwiSaver’s $140 billion).
They have achieved this success via a disciplined approach to saving. They have gradually increased contributions to 12% of their income, and apart from very limited withdrawal provisions on the grounds of financial hardship, compassionate or medical grounds or limited first home provisions, you generally cannot access your funds until retirement age.
As well as having time on their side (their scheme started in 1992), this disciplined approach is the reason why the average Australian’s super account balance today is more than $A400,000 at age 65, versus around $70,000 in KiwiSaver at the same age.
The same withdrawal restrictions apply to other world-leading, successful superannuation schemes such as in The Netherlands, Canada and Ireland, to name but a few.
Despite KiwiSaver’s success to date, there are always ways to improve. One of those is the rate at which we contribute to our accounts. At the current minimum settings of 3% contribution by the employee plus 3% by the employer (before ESCT - Employer Superannuation Contribution Tax), Kiwis risk under-saving for their retirement, despite doing what the 'government recommended”, e.g. saving 3% of their income.
Which is why it was so encouraging to see the Government announce in the May 2025 Budget that minimum contribution rates would move to 3.5% for employer and employee from 1 April 2026, and to 4% + 4% from 1 April 2028.
It was further encouraging in November 2025 to see National announce additional incremental contribution increases to 6% + 6% between 2029 and 2032, and NZ First go even further with talk of 10% + 10% (with some form of tax support to offset the cost).
So why, after such promising moves in November to improve the retirement savings of Kiwis by saving more, do we now see more ‘tinkering’ with the system with the announcement recently to allow withdrawals from KiwiSaver to buy a farm?
This piecemeal tinkering is not helpful. It undermines public confidence in KiwiSaver and its core purpose of saving for retirement.
If we are serious about becoming a nation of savers, having KiwiSaver working alongside NZ Super, and improving our ranking from 30th out of 32 positions in the OECD (right down there with Estonia, Latvia and Greece), then we need to be bold and set an ambitious, robust and future-proof long-term plan so KiwiSaver can reach its full potential.
A common feature of the most successful retirement savings systems around the world is compulsion, but none of our political parties appear to be thinking about that.
So, here are some simple things we could do to realise KiwiSaver’s full potential.
Continue to lift contribution rates. 10 or 12% combined is a good destination.
Ensure employer contributions are on top of wages and salary, not included as part of an employee’s ‘package’
Compulsory employer contributions at the default rate regardless of whether the employee contributes or not
Tax incentives or benefits for members for their deferred spending today to fund their retirement in the future. A larger private savings pot to supplement NZ Super will give future governments options for NZ Super settings.
Agreement across all political parties on a long-term strategy (a 10- or 20-year plan) for retirement savings and pensions. A plan which sees private and public savings working together and stops the constant tinkering by different governments.
In the absence of compulsion, these five things will have the most impact on the long-term robustness and success of our retirement savings so Kiwis can live the retirement they dream of.
Importantly, this also brings many other economic benefits to the country such as well capitalised and functioning public and private capital markets, capital for badly needed infrastructure projects, and well-diversified retirement savings.
But to achieve this, KiwiSaver needs a clear, long-term vision and plan which is agreed to by all political parties in a “set it and let it do its magic” kind of way, so we avoid tinkering, which threatens to undermine the whole system and undo all the good work achieved so far.
The opportunity to unlock KiwiSaver’s full potential is too big to ignore. We don’t need to look far to see what over $A4 trillion of savings can do for an economy and its retirees. But we need discipline and we need it now.