A push to lift KiwiSaver contributions to 6 per cent could leave the lowest paid New Zealanders worse off during their working lives without making them meaningfully better off in retirement, according to a new analysis from the country’s actuaries.
The Retirement Income Interest Group, part of the New Zealand Society of Actuaries, has looked at what would happen if the default contribution rate climbed to 6 per cent from employees and another 6 per cent from their employers. Its conclusion, reported by interest.co.nz, is that the headline number matters far less than who is being asked to pay it.
For someone on the minimum wage, the group found, a combined 12 per cent going into KiwiSaver could be excessive. The reason is counterintuitive. Pushing that much money aside each pay could hand a low earner more spending power after they stop work than they had while they were working, which is not the point of a savings scheme designed to smooth income across a lifetime. The group measures adequacy as a replacement rate of 80 to 100 per cent of after tax income, with the money lasting to at least age 90. A minimum wage earner contributing 6 per cent for a full career can sail past that target.
The practical worry is sharper still. Lower paid workers are the people most likely to reduce or pause their contributions for long stretches, particularly when childcare costs or a mortgage are squeezing the household budget. Every time they do, they walk away from the matching money their employer would otherwise tip in. A higher headline rate raises the stakes of that trade off without changing the underlying problem, which is that the people who can least afford to lock money away are the ones being asked to lock away the most as a share of their pay.
Median earners sit in a different position. The actuaries found a 6 per cent rate may suit those who contribute steadily across their working lives and pull money out for a first home in their thirties, since the home withdrawal sets their balance back and the higher rate helps them catch up. For median earners who never make a first home withdrawal and contribute the whole way through, the group reckons a 5 per cent member and 5 per cent employer split would be a better fit, delivering the target retirement income without overshooting it. That echoes the group’s 2025 finding that a 5 plus 5 arrangement is a suitable default level for most people.
At the top end the maths flips again. New Zealanders in the highest 10 per cent of earners are unlikely to reach an 80 per cent replacement rate on the default settings at all, because New Zealand Superannuation makes up a smaller slice of a big salary than it does of a modest one. Those people would need to work past 65 or make voluntary top ups to hit the mark, although in absolute dollar terms they still retire on far more than everyone else.
The findings land in the middle of a live political argument about how much KiwiSaver should ask of workers. The default contribution rate was 3 per cent for years, rose to 3.5 per cent in April 2025 and is legislated to reach 4 per cent by April 2028 under changes set out by Inland Revenue. The National Party has floated continuing the climb in half a percentage point steps to 6 per cent by 2032. New Zealand First has gone further, arguing for a 10 per cent rate with mandatory coverage so that every worker is enrolled and saving.
The actuaries are not arguing against higher saving as such. Their point is that a single national dial, turned up for everyone at once, produces very different outcomes depending on where a worker sits on the income ladder, and that the dial is currently set with median and higher earners in mind rather than the people at the bottom. Retirement Income Interest Group convenor Ian Perera has previously cautioned against one-size-fits-all thinking and encouraged people to review their own contributions against their life circumstances rather than treating the default as gospel.
There is a wider context that makes the timing pointed. Research released by the Retirement Commission shows that around 90 per cent of members earning over $50,000 are contributing, while participation falls away sharply among lower earners. The people a higher default rate is most likely to tip into hardship are also the people most likely to opt out of it, which raises the question of whether lifting the rate actually reaches them or simply asks more of the workers who were already comfortable saving.
None of this settles the politics. Supporters of a higher rate point out that New Zealand’s retirement savings are thin by international standards and that the country leans heavily on a flat rate pension funded entirely from current taxes, a model that gets more expensive as the population ages. Critics counter that forcing low earners to save more today does little for them and a lot for the fund managers who clip a fee on every dollar that flows in. What the actuaries have added is a reminder that the right answer is unlikely to be the same number for a checkout worker and a chief executive.
For now the legislated path stops at 4 per cent in 2028, and anything beyond that depends on which parties hold the balance of power after this year’s election. The actuaries’ message to whoever does is that the question is not simply how high to go, but who is being asked to climb.
What do you think, is 6 per cent too much to ask of low paid workers, or does New Zealand need to save more whatever the cost. Have your say in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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