Wasay Majid argues retirement savings and housing affordability policies can no longer be designed in isolation

By Wasay Majid*

In 2007, New Zealand became the first country in the world to introduce a national opt-out retirement savings scheme - KiwiSaver. The pitch was straightforward. Workers would be enrolled automatically, employers would contribute, and the accumulated funds would help ordinary New Zealanders onto the property ladder and into a secure retirement.

Eighteen years later, KiwiSaver holds $141 billion for 3.4 million people - approximately 96 per cent of the working-age population. Between 2020 and 2025, KiwiSaver funds nearly doubled from $72 billion. Yet homeownership rates for New Zealanders under 40 have continued to fall. First-home buyers face prices detached from wages by a margin that savings alone cannot close.

Why?

The Nudge

KiwiSaver's origins lie in behavioural economics: the insight that inertia can be turned into a policy tool. If workers are enrolled by default and must take deliberate action to leave, most will stay. Richard Thaler and Shlomo Benartzi demonstrated this in their 2004 "Save More Tomorrow" programme, showing automatic enrolment dramatically increased pension participation.

Thaler and Cass Sunstein later formalised the broader framework as "libertarian paternalism" in their 2008 book Nudge - published a year after New Zealand had already put the theory into practice.

The book became required reading in British Conservative circles. David Cameron set up the Behavioural Insights Team - quickly nicknamed the Nudge Unit - in the Cabinet Office in 2010, the first government institution in the world dedicated to applying behavioural science to public policy.

In 2012, the UK introduced mandatory auto-enrolment for workplace pensions. By the end of 2023, more than 11 million British workers had been enrolled who would not otherwise have saved. Opt-out rates remained below 10%. Australia's compulsory Superannuation Guarantee had been running since 1992. The United States followed a more voluntary path, but behavioural defaults became widespread after the 2006 Pension Protection Act.

Across the Anglosphere, the same logic prevailed: make saving the default and workers will comply. But auto-enrolment had a second-order consequence that received almost no attention. It transformed who controlled those savings.

An unprecedented concentration of capital

Before such national pension schemes, retirement savings were fragmented - dispersed across company schemes and personal accounts. Auto-enrolment concentrated them into the hands of a small number of asset managers.

In New Zealand, the top five KiwiSaver providers - ANZ, ASB, Fisher Funds, Westpac, and Milford - now manage around 66 per cent of the $141 billion in total assets with charging more than $650 million in fees in 2025, where, across all providers, annual fees sat at roughly $980 million for the 12 months ending December 2024.

Australia's superannuation system holds AU$4.2 trillion. UK workplace pension assets exceed £2 trillion. None of these are managed by government. The state designed the enrolment pipeline, but capital flows through private firms that make investment decisions according to their own mandates.

This is a consolidation of capital at a scale structurally impossible before opt-out defaults existed. An entire country's working population contributing automatically, every fortnight, for decades, is a phenomenon no voluntary scheme could produce.

Where the money goes

A pension fund managing billions cannot behave like a household saver. It needs assets that can absorb enormous inflows - stable, long-duration, liquid, and favourably treated by regulators.

As Chapter 4 of my book documents, housing-linked assets check every box. Residential mortgage-backed securities generate predictable cashflows. Property funds and Real Estate Investment Trusts (REITs) offer long-duration income. The Basel framework assigns residential mortgages unusually low capital risk weights, making them institutionally attractive. Central banks accept them as collateral. Regulators include them in liquidity buffers. Housing assets have been treated as the next best thing to government bonds.

Consider Australia's AU$4.3 trillion superannuation system. Direct property and infrastructure holdings reached AU$271 billion in domestic private markets alone as of June 2025, with additional international property investments embedded in the AU$248 billion overseas private markets portfolio. But that's just the visible part. Another substantial portion sits in bank deposits, bonds, and equities.

Since Australian banks devote roughly two-thirds of their lending to residential mortgages, a significant share of that exposure is effectively underwriting housing. Add private debt - the fastest-growing allocation at AU$31 billion - and the residential mortgage-backed securities embedded within the system's fixed-income portfolio. A conservative estimate suggests approximately AU$800 billion to AU$900 billion of Australia's retirement savings is structurally connected to housing - roughly one in every five dollars. The system doesn't merely lean toward property. It depends on it.

New Zealand tells a similar story. Home loans account for around 60 per cent to 65 per cent of total bank lending - meaning almost any KiwiSaver dollar routed through domestic finance touches housing. KiwiSaver funds hold bank deposits, buy bank bonds, and invest in equities dominated by the same four Australian-owned banks that originate the country's mortgages. At least one provider, Simplicity, explicitly allocates part of its defensive fund to loans secured by first mortgages over residential property and is now expanding into Build-to-Rent (BtR) development itself. The Reserve Bank does not disaggregate KiwiSaver holdings with Australia's granularity, so a precise figure is harder to pin down. But in a financial system this concentrated, the question is not whether KiwiSaver capital reaches the mortgage market - it is how much of it does not.

Build-to-rent and the institutional landlord

The most visible physical expression of pension capital entering housing is the BtR sector. These are large residential developments designed not to be sold to owner-occupiers but held as income-generating assets within institutional portfolios.

The UK provides a clear picture. BtR developments are now overwhelmingly financed by institutional investors - primarily pension funds and insurers seeking long-term, inflation-linked rental income. Research shows institutional capital funds nearly half of all BtR projects in the pipeline, with around 79 per cent of large developments backed by pensions, sovereign funds or asset managers investing retirement savings.

While institutional landlords still own a small share of total housing stock, they increasingly dominate new urban rental supply - demonstrating how pension capital enters housing not by buying existing homes, but by shaping the marginal supply that ultimately influences prices across the market.

When institutional buyers consistently participate in marginal transactions - new developments, bulk acquisitions, forward-funded projects - they establish reference prices that propagate through appraisal systems and lending standards.

What the rest of the world shows us

Whether the enrolment mechanism is opt-out, mandatory, or employer-default, the results converge.

The Demographia International Housing Affordability report records Australia's national median house-price-to-income multiple rising from 2.8 times in 1987 to 9.7 times in 2024. Among Australians aged 25 to 29, homeownership has fallen to 36 per cent.

In the United Kingdom, the government's own Pension Fund Investment review acknowledged in November 2024 that pension fund property investment carries "potential for negative spillover effects which can dampen economic growth - for example, by inflating asset prices." NEST Insight, the research arm of Britain's largest auto-enrolment scheme with 13.7 million members, is currently investigating whether pension assets are distorting the housing system. The report is due in early 2026. The question is now being asked institutionally - which is itself an acknowledgment that the structural concern is real.

Similar situations are emerging in the United States, where roughly US$40 trillion sits in retirement accounts increasingly concentrated through auto-enrolled pension systems. Public funds such as California Public Employees' Retirement System (CalPERS)  have allocated billions to private real estate vehicles managed by firms like Blackstone, now the country's largest residential landlord with more than 300,000 rental units. Tenants in Blackstone-owned properties in San Diego have testified at CalPERS board meetings that their rents rose by 43 per cent to 64 per cent within two years of acquisition.

New Zealand sits at the early stage of the same curve. KiwiSaver holds around $140 billion after 18 years. Australia's system is fourteen times larger relative to GDP. As BtR enters New Zealand at institutional scale, and as KiwiSaver balances compound over coming decades, the convergence will accelerate. The question is not whether the same pressures will emerge. It is when.

Understanding this does not mean KiwiSaver should be dismantled, nor that behavioural nudges were misguided. It means retirement savings and housing affordability policies can no longer be designed in isolation.

*Wasay Majid (Oxon) holds a PhD in Property from the University of Auckland and researches housing markets, affordability, and financialisation. His book Why You Can’t Afford a House is available on Amazon.