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KiwiSaver is avoided by the self-employed even though they need it just as much as everyone else. They face extra stresses and hurdles, so Martin Hawes welcomes the proposal to change incentives for this group to join

KiwiSaver is avoided by the self-employed even though they need it just as much as everyone else. They face extra stresses and hurdles, so Martin Hawes welcomes the proposal to change incentives for this group to join

Except for one year, I have spent all my working life self-employed. Last week I came out in the media strongly in favour of a Retirement Commission proposal to help the self-employed into KiwiSaver. This is a very large group (the self-employed) who do not have regular pay-days and many of whom are probably doing little or nothing about funding themselves later in life.

As the “gig economy” becomes more common (and, maybe, eventually becomes the norm), policy makers cannot assume that everyone has what they themselves have: steady employment, with a regular, dependable paycheque every second Thursday. There is a big and growing group of self-employed in danger of being forgotten and left behind. I think they need some help.

At the moment, Government will contribute 50c for every dollar contributed by a member up to a maximum of $521 per anum aged18 to 65. Of course, employed people get employer contributions as well – they have every incentive to join KiwiSaver.

But for the self-employed and small business owners, that Government Contribution of $521 per anum is the only sweetener they get from KiwiSaver. Anything else that goes into KiwiSaver comes from their own bank balance. That maximum of $521 per anum is a small incentive: barely enough to encourage the self-employed to join KiwiSaver let alone contribute.

The self-employed are different: they tend to have lumpy incomes and their businesses frequently have demands on their capital. The idea of joining KiwiSaver and contributing their precious cash (money that they might need someday soon when their business has a lean spell) probably does not enter their heads.

The message I get from the self-employed is “KiwiSaver is not for me”. This is reinforced by much of the language that comes out of the finance industry where the underlying assumption is that everyone is employed. Even Sorted, the Retirement Commission’s generally excellent web site, seldom, if ever, mentions the self-employed.

Therefore, the self-employed do not engage with retirement savings. They hope that their small businesses will make enough money that they will be ok and some may think they will be able to sell their businesses on retirement and live happily on the proceeds. In any event, they are often too busy trying to keep themselves afloat to think about and join KiwiSaver.

The stats bear all this out: while 73% of the full time employed are in KiwiSaver, just 40% of the self-employed are members. The difference between the two groups is that employees get the Employer contribution. Incentives work.

The Retirement Commission’s proposal is to give a Government Contribution of $2 for each $1 that is voluntarily invested up to a maximum of $2,000. Therefore, if someone contributes $1,000, with the Government’s $2,000 a total of $3,0000 would go into KiwiSaver. That is starting to get meaningful.

Small business is not easy: owners often have to juggle cash flow as they wait to get paid by their customers or have to manage a slow down for their product or service. The key thing to understand about the self-employed is that their income is not certain.

 Far from it: they may do well at times but they are often fearful that their cash flow will hit a hole. They cannot depend on regular income .

Clearly the KiwiSaver incentives are not great enough to over-ride the self-employeds’ special circumstances of lumpy, uncertain income.

That makes them wary of any saving scheme that they cannot touch - like KiwiSaver. Any self-employed or small business owner is likely to have lived through some lean times and they know that any surplus they have needs to be available to get them through the next one.

To encourage long-term savings the incentives need to be good – and clearly $521 per anum is not good enough.

There is one area where the self-employed are just like everyone else: they need to think about retirement and, especially, resourcing retirement. Some might have businesses that they can sell to fund retirement but that is always difficult and uncertain. The self-employed need help to get them into systematic savings and KiwiSaver is the best game in town The self-employed will have the same needs as everyone else and will be no better living off nothing but NZ Super than the rest. They need a plan and a better incentive to execute the plan.

*Martin Hawes is the Chair of the Summer Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and a Product Disclosure statement is available on request. Martin is an Authorised Financial Adviser and a Disclosure Statements is available on request and free of charge at This article is general in nature and not personalised advice.

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It's easier than you suggest, Martin. Just make Kiwisaver Contributions tax free for everyone. Let the top line pay the superannuation cost; scrap the $521 per annum and allow anyone to prepay their retirement up to the tune of, say, $10,000 per annum. Yes, that's perhaps $3,000 p.a. tax to Treasury forgone, but it's a locked-in cost-saving for future Governments in super costs?

It's a saving for the Government in future Super costs only if future Super entitlement is means tested against an individual's KiwiSaver assets.

I just can't see that happening. Even if it were a good idea fiscally, it's politically impossible. Old people and switched on people vote, in greater numbers than do the young and ill-informed, and they're not going to vote for a party that proposes penalising them for their thrift or return a Government that does so.

New Zealand is an outlier in not having a means tested pension. The politically impossible will become a a near certainty in my lifetime. Mathematics demands it.

Why do you always have to bring in means testing for the Super entitlement. [people have saved for their retirement, why do they have to continually pay tax on the retirement savings. Allow Pension fund savings to be tax free, in time do away with the National Pension fund introduced by Muldoon.
Incentivise people to look after their own retirement.. But Politicians will loose control over the voter!!! therefore we continually have this never ending discussion on retirement savings.

So your argument is today's workers should get nothing from the state when they retire but should keep paying taxes to underwrite today's retirees regardless of actual need?

Why should I tax myself more to incentivise myself??

"Kiwisaver the best game in town"...I don't think so. Its only marginally better than doing nothing at all.
Its not the money in that counts, its the money out. The government have been fiddling with it since its inception, I believe the chances of it being your own money to do what you want with at 65 are pretty slim.
More likely you will be forced to buy an annuity, which could even then be part of a future means testing of National Super.

Never ending game for the politicians to play with.


Anyone who turns down free money is an idiot. Put in $1042pa and get a top up of $521. That's a tax-free gain of 50%. The compounding effect of that over the long-term is huge.
Have you a shred of evidence that it won't be your money at retirement,or is that just another conspiracy theory?

By saving for retirement via kiwisaver you have given effective control of it to all the different governments that will be in power over the decades. Yes, the annual $500 is free money, but is insignificant when in time you have a large balance saved.
Most comparable countries have some form of means testing of their state pension. It wasn't that many years ago National intoduced the Superannuation Surcharge here, so there is a precedent.
As the increasing proportion of pensioners to workers puts pressure on the government finances, the workers (who will still outnumber the pensioners) may support the introduction of a means test.
In that case, compulsory purchase of an annuity could be introduced to stop people spending it in a way to avoid the means testing.
My preference is to save, invest and control my own money. If someone doesn't want to do that, they should join kiwisaver.

There are around 300,000 self-employed in NZ (roughly based on some quick statistics). So 60% are not in the scheme being 180,000. It seems like a tiny tax break of $1500 for business owners if they can be bothered to jump through all the hoops to sign up and provide identity, address and bank account information. It's more tempting but how many running their own business are going to have time.

Perhaps a better way to do this is to further cut tax on the self employed. Some of the cash flow problems for small businesses come from the provisional tax demands which can be excessive if someone goes from a good year to an ok year. Suddenly the cash flow dries up from the tax demands, and don't get corrected for a year.

My approach isn't as much about retirement but to stop tax gouging to allow better cash flow. More effective that money being locked up in Kiwisaver with the only method of drawing on the money being to buy a first home.

I don't know if it's my perception but it seems like a kind of weird election bribe.

Its takes 5 mins to fill in a form - scan and send - hey presto you are now a kiwisaver memember. "It's more tempting but how many running their own business are going to have time."? Same time as making a coffee and drinking it.

I am self employed and I have paid big into Kiwisaver. Because it is a very good idea.
Technically easy for me via PAYE. But also easy just to set up an monthly autopay.
The claims that it's too hard for the self employed to save are fallacies. Just as for low income people. Yes it is hard for anybody, but not doing so is a self inflicted injury. Self employed should be able to work that out.
The advantages of having those savings are far greater than any subsidy, so they should be ditched. Especially if you let it run a long time.
We don't need nanny state to run everything for everybody.

There are lots of different types of "self-employed" though. There are big differences between seasonal businesses, those with stable consulting income, and gig workers. This is only aimed at some of those.

Well done its not rocket science is it

Same. I'm a Sole Contractor. I pay the minimum though as I trust my money in my hands moslty. The Government Contribution is like getting a tax rebate back in forced savings. Who knows what the future will bring... We've had super before, then it was abolished, now we have it again!! All the best.

A bit ironic for the small business owner , paying into their employees kiwisavers , but not finding the time or means to pay into their own .
Perhaps making it an option as part of the Gst or provisional tax payment process, both generally income level calculated. The gove gives the extra payment as a % off provisional tax for e.g.

Days to the General Election: 25
See Party Policies here. Party Lists here.