Labour would force employers to keep paying into their staff’s KiwiSaver accounts even when workers cut back or stop their own contributions, and would lift the minimum employer rate to 6 percent by 2032, under a policy the party released on Sunday.
Leader Chris Hipkins announced the plan at the Sharesies office in Wellington, RNZ reported. It is Labour’s answer to the compulsory KiwiSaver scheme National put at the centre of its campaign in June, and it takes a different route to the same 6 percent employer figure.
“KiwiSaver is one of Labour’s proudest legacies. We created it, and now we’re going to make it work better for people,” Hipkins said in the party’s statement.
Under the policy, employer contributions would become compulsory from 1 July 2028 and would rise to at least 6 percent of pay by 2032. They would continue while a worker is on paid parental leave and would carry on for staff who keep working past 65. The default rate for employees would be 4 percent, but Labour says it would remove the minimum contribution rate for workers and give them more freedom to choose how much they put in as their circumstances change. The party would also ban new “total remuneration” contracts, where the employer’s KiwiSaver contribution is folded into an employee’s salary rather than paid on top, and would look at more flexible options for self-employed people.
The biggest practical change is for people who have stopped saving. Under the current rules employers only have to pay the compulsory contribution while the worker is contributing too. Inland Revenue’s guidance for employers says that once an approved savings suspension is in place, carrying on with an employer contribution is the employer’s choice.
That matters because of how many people have pulled back. “More than a million working-age KiwiSaver members aren’t contributing at all, while 83,400 are on a savings suspension,” Hipkins said. Newswire reported last week that the average KiwiSaver balance has passed $40,000.
The current default rate for both employee and employer rose from 3 percent to 3.5 percent on 1 April this year and is already set to rise to 4 percent on 1 April 2028, according to Inland Revenue. Labour’s employee default of 4 percent matches that planned rate. The new part is the employer side, which would keep climbing to 6 percent and would no longer depend on the worker putting money in.
Finance spokesperson Barbara Edmonds framed the difference with National directly. “Labour will require employers to contribute at the same amount as National is proposing but give workers more flexibility when money is tight,” she said.
National’s policy, launched at its annual conference in June and covered by Newswire at the time, would make KiwiSaver compulsory for all workers from 1 July 2028, with the combined default rate lifting to 12 percent by 2032. That means 6 percent from the employee and 6 percent from the employer, with both contributions compulsory. National would also enrol every baby at birth with a $1,500 Baby Boost payment and would pay KiwiSaver contributions to people on paid parental leave from 1 July 2027.
A Newswire worked example shows what the gap looks like in dollars. Take a worker on $70,000 a year in 2032. Under Labour, the employer would pay $4,200 a year into their account whether or not they contribute. If the worker stays at the 4 percent default they would add $2,800, for a combined $7,000. Under National, both sides would pay $4,200, for a combined $8,400. So at the default rates the National plan saves $1,400 more a year for that worker, but it also takes $1,400 more out of their pay packet each year. Under the rules already in law, both sides would be paying 4 percent from 2028, or $5,600 combined. All of these figures are before tax, and employer contributions are taxed through employer superannuation contribution tax, which Inland Revenue explains here. Readers can model their own balance with Newswire’s KiwiSaver growth simulator.
Labour said the extra employer contributions would lift the Government’s income from employer superannuation contribution tax, and that money would help pay for contributions to parents on paid parental leave and for the Government’s own higher costs as an employer, RNZ reported. It said this would be managed through the Budget process.
Finance Minister Nicola Willis, speaking for National, called the policy a watered-down version of her party’s. “While imitation is a sincere form of flattery, their attempt falls short. It’s less ambitious than National’s and won’t help Kiwis saving for their future anywhere near as much,” she told RNZ.
Anne Collins, the widow of former Finance Minister Sir Michael Cullen, who introduced KiwiSaver in 2007, welcomed it. “This is just a perfect solution because it’s such a very, very successful policy,” she told RNZ.
Simplicity founder Sam Stubbs gave it a mixed review. “Moving to compulsion is good, moving to employer-only contributions is good, getting rid of total remuneration contracts is good, but the amount that they want Kiwis to save for their future is not going to be nearly enough,” he said. He also wanted accounts for children. “We should be having KiwiSaver accounts at birth and the member tax credit that people get at the moment should be redirected towards children.”
That is where Labour parts company with both National and New Zealand First, which have each proposed enrolling babies automatically. Hipkins said automatic enrolment was not something Labour was considering at this stage. “Right now we have to make different choices, and we made different choices,” he said.
For employers, the policy is a clear cost. A business paying 3.5 percent today would, by 2032, pay 6 percent on every staff member in KiwiSaver, including those who have paused their own savings and those over 65. National’s plan reaches the same employer rate, so whichever of the two large parties leads the next government, businesses face a steadily rising KiwiSaver bill over the next six years. The real choice for voters is whether workers should be made to match it.
The election is on 7 November. To see which party’s policies line up best with your own views, try Newswire’s voting tool.
Should workers be made to save, or is Labour right to leave that choice with them while making employers pay regardless? Tell us what you think 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 🙂
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