On average over the past three years, 89% of Government KiwiSaver contributions were paid into the KiwiSaver accounts of employees while only 7% were paid into the KiwiSaver accounts of the self-employed.
With more than 420,000 self-employed people in New Zealand, there are concerns that thousands of people could run the risk of retiring financially vulnerable as the self-employed are falling behind when it comes to KiwiSaver.
“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,” a joint report called Improving the retirement savings of the self-employed, published on Tuesday by Te Ara Ahunga Ora Retirement Commission and digital accounting service Hnry found.
“These factors are compounded by recent changes to KiwiSaver settings announced in Budget 2025, which may further discourage participation among lower-income earners.”
Sole traders and the self employed
People who are self-employed 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).
In some industries, it’s not possible to be a salaried wage earner, Hnry chief executive James Fuller says.
“When you look at the spread of sole traders that exist in New Zealand - we’re talking a combination of freelance creatives, gig workers, courier drivers, real estate agents, midwives, personal trainers - these are people for whom it’s actually quite rare for that industry to provide salaried employment.”
There are entire industries, and a large number of New Zealanders, who don’t have a choice but to be self-employed based on the work they do and the skills they have, Fuller says.
Fuller says this is not a workforce who decided to set up a dropshipping e-commerce store. "These are people who make either some or all of their income by self-employed means.”
KiwiSaver
People who are self-employed don't receive employer KiwiSaver contributions, so if they are contributing, it’s voluntary.
Following this year’s Budget, the Government’s contribution rate has gone down to 25 cents for each dollar a member contributes.
This was previously 50 cents for each dollar, which meant receiving a maximum Government contribution of $521.43. To get the Government’s full contribution now, which is $260.72, people need to put in at least $1042.86 of their own money between July 1 to June 30 each year.
Fuller says: “The critical thing we’re seeing is that the low income self-employed earners are the ones who are missing out the most. You’ve got an income gap effect where those who are earning an average of $110,000 in self-employed income are getting the full Government contribution.”
“And those who aren’t getting that full Government contribution are averaging around $31,000 of self-employed income.”
“That was ahead of Budget 2025 where those changes only serve to worsen that inequity. Reducing that match rate basically discourages lower income earners to engage with KiwiSaver. They already struggle to contribute enough,” Fuller says.
“It makes KiwiSaver less effective and less attractive for those on lower incomes who probably need it the most when it comes to retirement and we’ve been saying it’s creating a generation of sole traders who are going to become more reliant on the state as they achieve retirement age.”
The report found 24% of sole traders said they would reduce their KiwiSaver contributions because of the KiwiSaver change following the Budget.
And a further 6% said they would stop contributing to KiwiSaver altogether.
The report says “with sole traders already under-contributing to their retirement, the fact that nearly one in three now intend to reduce or stop their contributions entirely is concerning”.
“Additionally, we know that, in the absence of KiwiSaver, many sole traders place their money in more conservative investment vehicles, such as savings accounts or term deposits, which are likely to result in lower returns and limit a sole trader’s ability to generate enough wealth for retirement.”
The report says some of the changes to KiwiSaver haven’t improved retirement outcomes - it appears to be worsening them.
Fuller says the working environment in New Zealand has changed significantly in the last 20 to 30 years and self-employment is a viable, long-term career choice for a large amount of the population.
“The Government is really showing they’re out of step with the realities of the working world.”
Vulnerable
The report found 41.9% of sole traders were saving between 1% and 10% of their income from all jobs - 19.4% of respondents reported not saving anything at all.
The report says: “A significant portion are not building any financial buffer leaving them vulnerable to income shocks and long-term insecurity.”
KiwiSaver engagement among sole traders was highly sensitive to “short-term fiscal pressures - limiting long-term savings outcomes”, the report found.
“Because sole traders often have irregular income patterns, and do not receive paid sick leave or annual leave from an employer, their earnings can fluctuate significantly over time.”
“Most sole traders will experience periods of higher income followed by quieter stretches where income is much lower,” the report says.
Fuller says there’s an idea that if you’re a salaried earner, your KiwiSaver contributions are effectively a proportion of your income.
“Whereas not only do self-employed people struggle with the fact that some of them aren’t aware that they can make voluntary KiwiSaver contributions, that also with the fluctuating nature of income, it’s more difficult for them to set up regular payments.”
Proportion of income
If retirement was designed with sole traders in mind, then KiwiSaver contributions could be based on a proportion of income as and when it is earned, the report says.
“Under this type of system, when a sole trader is bringing in more income, they contribute more to KiwiSaver. And when they earn less their contributions naturally scale down.”
However the report does acknowledge this would be complex to implement in practice as banks would need mechanisms to ‘tag’ income for percentage-based deductions or purpose specific accounts.
And this would require significant changes to existing banking infrastructure.
“The scheme’s voluntary nature, fixed contribution structures, and limited integration with the tools and platforms used by sole traders mean that many are not building sufficient retirement savings.
“This risks poorer outcomes for a growing segment of the workforce and increased reliance on
public support in later life.”
“In short, the challenge is not just to close the participation gap, but to build a retirement savings system that works for all New Zealanders, regardless of how they earn their income,” the report says.
Fuller says sole traders do want to be engaged in their retirement plans and to plan ahead. “But the mechanisms for them to do so just do not exist.”
‘Left behind’
Fuller says when some sole traders reach retirement age they will be reliant wholly on the Government.
“It’s all very well to look at it as being a cost saving today … but in the future, whoever the Government of the day is, is going to be left with a very big bill to pick up.”
“Sole traders face a very real risk of poverty in retirement unless there is a cross-party consensus and policies that help them save more.”
Fuller says Hnry will continue to “bang the drum until we see some meaningful and real change”.
Retirement Commissioner Jane Wrightson says “self-employed New Zealanders make up a growing share of our workforce, yet they are being left behind when it comes to retirement savings”.
“Without meaningful reform, we risk seeing hundreds of thousands of people reach retirement without sufficient financial security.
“More retirees will rely heavily on government transfers (such as NZ Super and other benefits) and other public support,” Wrightson says.
“Today’s inaction could become tomorrow’s fiscal burden.”
4 Comments
Is Kiwisaver available to Kiwis working overseas? That was closed to me when I worked in Japan. I didn't even want the govt contribution.
No, it is not. Even if you joined KiwiSaver whilst in NZ and then made voluntary contributions from overseas to get the government contribution, if IRD become aware that you were overseas then they will claw back the government contribution paid whilst you were offshore. When you make an initial withdrawal after 65, you have to complete a statutory declaration as part of the process which includes asking if you spent any time overseas
The government contribution is really irrelevant to an adequate Kiwisaver. You should do it without consideration of that.
I was self employed. I contributed big to Kiwisaver.
I owned the company, with a big handful of employees. I paid myself as an employee with big, indeed huge, KS employer contributions. Which were all tax deductible to the company. Why would you not?
But the real problem is culture. New Zealanders lack of understanding of the sheer power of capital build. Instead it's live for the moment.
How many of those driving around in their leased Ford Ranger would say they could not afford KS contributions.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.