Despite concerns, National Party leader Christopher Luxon says party's KiwiSaver policy requiring self-employed people to contribute 4% is 'fair and reasonable'

While it’s great the National Party has acknowledged sole traders in its suite of KiwiSaver policies, there’s doubt these proposed changes actually address the challenges self-employed people face, the chief executive of digital accounting service Hnry says.

“It doesn’t really explain how some of the practical challenges that sole traders face can be addressed, and further to that, it also doesn’t address how some of this will be executed," Hnry chief executive James Fuller said.

Fuller's comments come after National Party leader Christopher Luxon announced at his party’s annual conference on Sunday, that if re-elected, one of the changes National would make to KiwiSaver is to make the savings scheme, or an equivalent scheme, compulsory for workers.

National's KiwiSaver proposal also includes automatic enrolment for every baby born in New Zealand along with a $1500 Baby Boost payment, and a contribution into a parent’s KiwiSaver while they’re on paid parental leave.

For the self-employed, in its policy document, National said: “Self-employed individuals would only be required to contribute the equivalent of the employee contribution. This means someone who is self-employed from 1 July 2028 will be required to contribute 4% of their income to their KiwiSaver (not the combined rate of 8%).”

Currently the self-employed don't receive employer KiwiSaver contributions, so if they are contributing to KiwiSaver themselves, it’s voluntary.

Speaking to reporters on Monday, Luxon said there were lower levels of contribution from the self-employed and National’s expectation was that they contributed half of the combined rate, which he thought was “pretty fair and reasonable”.

Luxon said: “I just think, at the end of the day, if you strip the politics out and step back and look at this policy, it is bold, I get it, but I think when you go through the five components of contributions, compulsion, paid parental leave, the baby bonus and the over 65s … I’m hoping that other parties get on board."

Having lived in other countries that have elements of compulsion, Luxon said it was quite normal for entrepreneurs to be making contributions.

“I think it’s fair and reasonable to say, ‘Look, we expect you to contribute one half of that equation...’ That’s reasonable.”

'It doesn't feel like a natural choice for sole traders'

While the policy was a nod to sole traders and the self-employed, Fuller said; “things like fluctuating cash flow, irregular income, the absence of employer contributions … even down to the fact that, for the vast majority of sole traders, KiwiSaver does not feel like it's a sensible choice for them."

“It doesn’t feel like a natural choice for sole traders purely because of the way that KiwiSaver system works … It’s not a lack of understanding or education about wanting to plan ahead for retirement and it’s not that they’re simply forgetting to pay into something for retirement. It’s based on the lack of incentive from KiwiSaver.”

Last year, Hnry and the Retirement Commission put out a report on sole traders and retirement, which said: “The evidence points to a clear gap in engagement, driven by financial strain, lack of automatic enrolment, limited awareness of incentives, and the absence of employer contributions.”

Those factors were compounded, the report said, by changes to KiwiSaver settings in Budget 2025 which saw the Government’s maximum contribution halved to $260.72 - with people needing to put in at least $1042,86 of their own money to get this full contribution.

Fuller also said there were sole traders who earned money as both a salaried employee and from self-employment.

This raised questions about how they would pay KiwiSaver, as in the past, some of those people would have chosen not to contribute to KiwiSaver through their self-employment income because they already had sufficient coverage from their salary job, he said. 

"There's nuance here," Fuller said and he thought the broad brush statement of sole traders having a 4% compulsory KiwiSaver contribution missed the nuance of the self-employed workforce.

"It misses the nuance around exactly how income is earned by 15% to 20% of [the] New Zealand population, and then I think it also completely misses the net impact of this from a government perspective ... That lack of nuance, that lack of detail, is what's causing quite a bit of confusion, where people are a little unsure as to what this means."

Fuller said flexibility mattered to sole traders.

“The vast majority of sole traders are so by choice and this is sort of taking something that was equally as flexible which is the choice to contribute to their KiwiSaver and making it mandatory.”

He said it could be considered “government overreach” and whilst the intent was in the right place, which was to bolster retirement savings of sole traders; “it feels like it might be sort of a bit of a blunt instrument that is not quite well thought through in the detail.”

Working through the mechanics

Asked about how the 4% contribution for the self-employed would be enforced, National’s revenue spokesperson Simon Watts said the party needed to work through the mechanics around that process.

“Self-employed individuals already do contribute to KiwiSaver, so it’s not a new phenomenon. We’re simply just referring to the fact that their contributions will be compulsory," Watts said.

Labour says there's 'significant unanswered questions'

On Monday, Labour leader Chris Hipkins said: “In a cost-of-living crisis, they haven’t answered how they’re going to support low-income New Zealanders who have opted out because they can’t afford to be in KiwiSaver."

“They haven’t said how they’re going to support them to do that. They haven’t said how they’re going to pay for the commitments that they’re making, they haven’t said how they’re going to support self-employed people who, again, are more likely to not be part of KiwiSaver because of their self-employed status.”

There were still "significant unanswered questions", Hipkins said.

There are over 420,000 self-employed people in New Zealand. They can be sole traders or work under more of a company structure.

Sole traders are people who run their own businesses, work for themselves or work as contractors for someone else. These include tradies, artists, and small business owners (think hairdressers or landscape gardeners) and in some industries, it’s not always possible to be a salaried wage earner.