Financial advisory firm National Capital says individuals who aren't contributing to their KiwiSaver could potentially lose collectively $113 billion by the time they retire.
National Capital’s latest Value for Money report says younger individuals are more likely to experience the greatest impact.
Those aged between 18-24 face an average loss of $312,004 each, or a total of $30.28 billion by the age of 65, while those aged between 25-34 face an average loss of $254,988 per person, or $45.96 billion, by retirement age.
While older age groups stand to lose less, it's still in the billions.
The 35-44 age group could potentially lose $156,319 per person or $25.35 billion in total by age 65.
Those in the 45-54 bracket could lose $75,931 each, or a collective total of $10.55 billion, and the 55-64 group face losing $14,642 per person, or $1.83 billion by retirement.
In the same report, the firm says findings from 693 participants in a KiwiSaver survey conducted by NZ Compare earlier this year show participants strongly in support of compulsory KiwiSaver.
Two-thirds, or 62% of the survey respondents, believe KiwiSaver should be compulsory with both younger and older people in support.
The percentage was higher in older participants – 79% of people over 65 and 71% of those aged 60-64 agreed that KiwiSaver should be compulsory compared to 68% of those aged 18-27.
Interestingly, Kiwis aged between 28-43 years of age were the exception as only 48% of respondents in that age range supported compulsory KiwiSaver contributions.
Respondents in this 28-43 range expressed concern for preserving personal choice and managing affordability and cost of living pressures.
The majority of the survey participants – 74% – planned to use their KiwiSaver money for either living expenses when they retire or to pay off their mortgage – which National Capital says shows how important KiwiSaver is for people's money plans in New Zealand.
Using KiwiSaver data from IRD, MBIE, and Statistics NZ, National Capital determined that if the 703,325 non-contributing members enrolled in KiwiSaver and contributed the minimum of 3%, the total amount they could accumulate by retirement would be approximately $113 billion.
Basic retirement
National Capital says its KiwiSaver Contribution Index – which measures how much KiwiSaver members contribute to their retirement savings via KiwiSaver regular contributions – was sitting at 4.27% between January and December 2023.
The firm says this is “significantly lower” than the more optimal index amount of 6.3%.
National Capital’s KiwiSaver Contribution Index indicates New Zealanders need to accumulate an average of 6.3% of their incomes for just a “basic retirement” – however the current cost of living challenges this necessity.
The firm says the 4.27% contribution figure means many people aren't saving enough for retirement.
“For instance, if a 40-year-old Kiwi saves 4% in a KiwiSaver Growth fund, they'll have $320,000 by age 65. However, they'll need $142,000 more to have enough for a normal weekly income in retirement. This under-contribution does not bode well for Kiwis’ retirement prospects,” the report says.
The Contribution Index fell by 0.03% in the December quarter and the firm attributed this being potentially due to the rising cost of living.
“It shows that many Kiwis are focusing on immediate needs rather than saving for the future.”
Meanwhile, National Capital’s KiwiSaver Allocation Index, which measures how New Zealanders are investing in KiwiSaver, increased allocation by 0.6 to 59.6 in the December 2023 quarter.
A higher index equals a higher growth allocation.
The index had a 3.6 total increase between January 2023 and December 2023 but had experienced stability over two quarters last year.
“Unfortunately, this consistency is not a positive sign. It shows that despite efforts by the Government and KiwiSaver providers to educate, there is still a lot of work to get to the optimal number of 68.8,” the report says.
34 Comments
"Ditch super. Replace it with Universal KiwiSaver at rates good enough to give people old age security."
Are you suggesting a significant % of the population get nothing because they're been stay at home mums and/or are on such low incomes their Kiwisaver balances won't cover more than a year or two?
"And why tax it. Tax-free at entry, during and exit."
Have you done the maths on that?
(edit: no I am not.)
The other question was "why tax it". Genuine question.
I know the of idea that whatever the source income should be taxed equally. But there is also the idea this is a thing that is compulsory, and locked in, and for a specific purpose of social good, so it is a quite different thing.
And if KiwiSaver balances became so much larger, which they would, any tax stream would be vastly increased. Govt does not get much now, an opportunity not to start.
Math. Who knows. But seems likely on lifetime contributions, with no tax on returns, required contributions might not be so large.
I have seen calculations of what percentage of your income you need to contribute, to maintain that same income after twenty years, or thirty years.
Most Kiwisaver non contributors don't have a work income to contribute. So it seems kind of pointless for them to contribute 3% or even 8% of nothing to a system that is set up to disenfranchise those with poor access to income and limited access to existing investment services (including the inaccessible Kiwisaver services that are designed to obfuscate investment information) and independent financial advice. Even worse most Kiwisavers don't have enough emergency savings to last even 1-2 months without access to their homes & jobs. Seems like there is a bigger issue than large banking organizations not getting more of the cut of the newly minted profit channel.
Morons say you can use kiwisaver for hardship but you actually have to wait for months after you have desperate need of the funds before even being able to apply, (usually by that time you have already had severe crisis and risk of death). Too often people have become homeless or died before they could access their kiwisaver for life saving support. What is the point of the investment funds if you are not alive to use them. It cant be used for funeral services either as family find out. At best the funds are designed to be highly ableist and discriminatory and often ignore the fact that most people are too poor, living paycheck to paycheck, in the first place to be able to afford an additional investment goal beyond future housing security.
Have to disagree with any of that Pacifica.
Use auto payments
Disenfranchisement? Not sure of your point.
Banking profits. A bigger KS would mean more fee competition. Lazy if you don't take advantage of that.
Hardship. There should not be a hardship provision. If there is one, it should be tough anyway.
- yes I know we have wise self investors here on interest.co. But KS should be universal, it's to protect you from less wise, who you otherwise could be supporting later. And it's just part of your portfolio.
KH - try some empathy? Imagine if you were supporting a family while working on minimum wage and working to upskill yourself to get out of that space, with no savings or contacts because you're a recent immigrant. Then please tell us which of your family's basic needs you'd forgo to save for retirement.
So easy to talk about savings if your wage covers the frugal basics with a few bucks in the bank. But you'd get laughed out of you were to posit this argument with a factory or retail worker in that situation.
you're missing Pacifica's point.
for many people, saving is not possible without pushing their families into serious material hardship due to having nil or negative disposable income once the frugal basics are met, leaving nothing for savings
Capitalist thinking reduces these people to resources to be compensated for work done, whilst rewarding holders of capital, rights, titles or other advantage, who may have done no work at all.
The government can afford whatever the people are willing and able to tax for, and prioritise spending on.
And for what it's worth, I support means testing super and raising the super age
https://www.stats.govt.nz/methods/measuring-child-poverty-material-hard…
Have a look at how many of these material hardship measures that you miss out on, and compare that with the percentage of the population who actually miss out, then tell us how you expect these people to push themselves into further material hardship to save more for retirement?
Almost needs one of those warnings about some readers may find this content disturbing:
https://www.nzherald.co.nz/rotorua-daily-post/news/elderly-bay-of-plent…
So according to them they should be able to live on a jobseeker benefit or supported living. Requiring a higher cost pension benefit to those over 65 including over 80% who don't need it at all means there really is less money for essentials to live for those who literally cannot work because of disablement and cannot afford housing (even though in that case in the article they had the means early on in life to do so and opted not to, they are seeking only a premium style of housing and they are able to work).
I know several in council housing with investment properties, businesses, and who gamble away the pension regularly in the casino. Why are we turning away homeless families for council housing while investment property owners over 65 get the pick of the crop of social housing simply because of a birthday. It is ludicrous that this women in the article opts and refuses to live with family, refuses to live in anything but a free standing single level property by herself and instead thinks she is entitled to council housing or automatic support even though her income is much higher than most homeless families and disabled under 65. It is almost like at 65 people get a lobotomy that makes them think they are entitled to a free lazy ride even though they are able to work and have support & sufficient funds.
The fact she is using extreme emotional manipulation and abuse of her family members in this position, expecting them to fix her issues but placing impossible conditions is rather disgusting. I know family like that and their children will celebrate their death as the emotional abuse and manipulation will stop and the chapter on their child abuse can be closed. Emotional abuse of family is not ok, especially when the drama and torment of that family is intentional even though the family are doing their best to meet impossible conditions and cannot magically do everything the women wants. All simply because she decides she wants a premium but is not prepared to do any work for her housing not even to plan for herself.
With so many kiwisaver providers also offering parallel investment accounts which can be accessed at any time, why would anyone put more into kiwisaver than attracts either employer or government contribution?
It would be interesting if the analysis looked at any differentiation between savings going into kiwisaver accounts and investment accounts over time. Then we might get a better picture on current trends in saving appetite/ability.
1/ So many assumptions in the "lost Kiwisaver" figures!
2/ Those who have retired early probably don't care that they are not putting any more into their Kiwisaver. But would almost certainly put the annual $1040 in.
3/ The old Govt Super used to be at the rate of 6.5% So Kiwisaver has always been really small in comparison.
4/ Without Kiwisaver, people would be paid more and could do what they wanted with the extra money.
NB. At the beginning of Kiwisaver the employer contribution would have been over and above normal pay rates but that would have eroded down to zero not long after that.
When I look at Kiwisaver, it's hardly any advantages for me to put my money into kiwisaver than to a normal PIE fund. I don't get tax relives, I cannot take it out until 65, the only good bit is the tax credit up to $521. Some may get employer contributions (up to 2%), but some employer just add those monies as part of the employee salaries anyways.
If I have a choice, I won't take part of kiwisaver, or contribute any more than the minimum 3%.
My article would have been
Kiwisaver is Not Working and Needs an Overhaul, Its features are looking pathetic when compared to Australia Super
Nearly 2 million NZers are not contributing anything to kiwisaver, so won't get the free money from their employer or govt. That is so many with none or minimal super in retirement
Its time to copy one of the best super plans in the world - from Australia. Currently employers contribute 11% which is moving to 12% in 2025 - That is an incredible scheme which will give Australians the chance to retire at a decent age and have dignity in retirement. A plan for NZ for a confident government and businesses keen to build a good society could be:
2025 3% employer contribution to each employee as compulsory to all (as opposed to those who choose kiwisaver)
2027 NZ employers contribution to 4%
2029 NZ employers contribution to 5%
2030 NZ employers contribution moving to 6%
2032 NZ employers contribution moving to 7%
2034 NZ employers contribution moving to 8%
2036 NZ employers contribution moving to 9%
2038 NZ employers contribution moving to 10%
I realise this might be hard for business owners to support but the benefits to you would be better retention of staff with less offloading to Australia
Also does the govt actually have to take so much tax off the employer contribution. Currently you really only get 2% from the employer due to tax on employer contributions - that tax rate could be changed from the marginal rate of 30% or 33% of most to 15% like Aus
Also look at including some of Australias other features like salary sacrifice to super, life policy premiums paid out of super balances, self managed super funds,
Source - As many as 1,862,000 didn’t contribute at all in the year to 31 March 2022
https://sharenz.com/2022-kiwisaver-report-are-people-making-the-most-of…
Fun fact most of those who actually need the Australian super did not have steady work income and do not have investment savings because here is a clue they actually could not work. So there literally are no employer contributions for those people. It is ironic then you think there are potential employers and jobs for everyone including those in hospital settings. Yep employers can't wait to give jobs to those on chemo or with non RR MS who are absent 70% of the time (often the most severely unwell and even bedridden) and just severely sick the other 30% and unable to work any public or colleague facing roles because of severely compromised immune systems.
But sure lets assume everyone is able to get a work income over 80k a year, enough to save and afford housing. We know it is impossible for most people (over 65% of the population) but it lets you pretend everyone has the same opportunities to save and invest to have a retirement fund, eh. All so the banks can cut more of those sweet fees off the top... by any chance you would not have a career related to the investment markets. Most kiwisaver advisors and investment advisors are tainted as they are so divorced from reality and most of the population's incomes. They knowingly promote biased policies that only favors those in the upper quartile of incomes (and personally benefits them more than most people who actually need retirement support).
This bias and self serving advice is really clear in the locked in design that secures a investment provider's income stream. They don't need to advertise as much because consumers of these old investment products dressed up in the emperors new clothes are often locked in early and it is much more difficult to transfer than literally any other investment type. Even worse they have less reporting and less regulatory requirements for kiwisaver investments then is required for all other investment types. It is for the providers a win win.
However for most smart investors it is easy to see the severe flaws in Kiwisaver. I spotted ANZ was pocketing the government contribution and not paying it into ~50000 customer accounts simply by back checking the math and the flawed code they used. Most those ~50000 customers could not even see they were missing out on their government contributions because that information was being hidden from them in the website and app reporting and statements. When ~50000 customers cannot even tell what is their income, (from them, employers & govt) and what is investment performance income from the data provided to them there is a severe problem with the investment service. ANZ did a short apology article, did not contact or inform most customers of the loss, and they did not compensate them for the lost investment income either. It was a minimal level of customer service required and no updates were made to the information provided to the customers of the kiwisaver investments. Sweep it under the rug, business as usual. Kiwisaver is a goldmine if you are keen to have a steady source of fee income with even less work, less competition for your products and less customer rights.
This was not an issue isolated to ANZ. Most Kiwisaver investment providers knowingly provide less services and information to customers then they do for other investment products. They can easily scrape new fees of work they were doing already with very little honesty in their services and advertising. At best it is disturbing to hear anyone who recommends kiwisaver over self managing investments with full flexibility to adapt to life conditions. Like hearing anyone who suggests retaining the investment with homelessness and death by critical illness as a positive and they will be real glad they had kiwisaver when they should have turned 65 but died instead. Here is a clue there is a reason those with limiting medical conditions that kill them often before the age of 45 needed a special clause in Kiwisaver; however they left out most of the life limiting conditions in that clause.
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