NZ Society of Actuaries group suggests 6% KiwiSaver contributions could be excessive for low wage earners, and 5% could be a good fit for median wage earners

A 6% KiwiSaver contribution rate for minimum wage earners may be excessive as it could lead people to have a higher spending capacity after retirement than before retirement, a report says.

This is among the findings in a report called Retirement savings adequacy: 6% + 6% Contribution to KiwiSaver from the Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries. The report looks into the impact of having contribution rates increase to 6% for members and 6% for their employers.

RIIG looks at what a 6% member and employer contribution to KiwiSaver would look like for median earners, minimum wage earners and high earners, with the latter being the top 10% of NZ earners.

For minimum wage earners, the report says the group may be more likely to reduce or suspend contributions for prolonged periods of their working lifetime.

"For minimum wage earners a 6% KiwiSaver contribution may be excessive, as it could result in them having higher spending capacity after retirement than before retirement. Higher spending capacity in retirement is not inherently undesirable. However, for this group the reduction in consumption before retirement may be more consequential, particularly during periods of higher expenses such as childcare or mortgage servicing," the report says.

"The tension between current financial hardship and missing out on a 6% employer contribution to improve long term outcomes could be a concern for this group."

As for median wage earners, a 6% contribution rate “may be suitable for a median earner contributing throughout their career and making a first home withdrawal in their thirties.”

“A 5% + 5% contribution could be a better fit for those contributing throughout their career and not making a first home withdrawal.”

KiwiSaver, retirement and superannuation are hot topics this election year.

The National Party says it wants to continue increasing contribution rates for employers and employees. Additional increases would start from April 2029, rising by 0.5% per year until April 2032 - to a 6% contribution rate for employers and employees each.

New Zealand First's KiwiSaver election policy proposes increasing employee and employer contributions to 10% and making KiwiSaver compulsory. The party is also pledging to make KiwiSaver compulsory from birth, with an automatic Crown contribution of $1000.

Last year’s budget saw employee and employer contribution rates increase to 3.5% from April this year from 3%, and to 4% in April 2028. KiwiSaver members can choose to stay at the current 3% rate and still be matched at this rate by their employer.

What's adequate?

RIIG’s research has assumptions which are used for these calculations. Alongside this, there are some caveats - due to people’s individual needs, preferences, and constraints, when it comes to spending and saving, “adequacy of retirement income” can’t be specifically defined.

RIIG uses three areas to consider what’s “adequate”. These three areas are how much retirees currently spend, hypothetical spend and the replacement rate (income immediately after retirement divided by the income before retirement).

When it comes to the replacement rate, RIIG assesses retirement income is adequate if it “implies a replacement rate of 80% to 100% after tax with income lasting to at least age 90”.

For high wage earners, RIIG’s report says people earning at a high level throughout their working life are unlikely to reach a replacement rate of 80% without either working beyond age 65 or making extra voluntary contributions.

“This reflects two main factors. First, NZ Super represents a much smaller proportion of pre-retirement income for high earners. Second, rapid salary growth means that contributions made earlier in the career become less significant when expressed as a proportion of final salary.”

“However, a suitable replacement rate for individuals in this group is likely to be a personal choice that will be made with advice. A replacement rate below 80% may be acceptable for many people in this group. Although their replacement rate is lower than median earners they will have more income in absolute terms,” the report says.

“Overall, given current superannuation settings, we continue to think that a 5% member and 5% employer contribution is a suitable default level,” the report says.

“This gives a better balance between pre-retirement and retirement spending capacity, particularly for lower earners.”

RIIG previously came to this conclusion about having a 5% member and 5% employer contribution in a report from 2025. It found for most New Zealanders, having a 5% KiwiSaver default matched contribution would help them reach an adequate retirement income.

At the time, RIIG convenor Ian Perera previously told interest.co.nz people needed to avoid the expectation that one-size-fits-all when it comes to KiwiSaver contributions and avoid thinking that whatever the standard contribution rate is, is all they have to do.

“I think you definitely should be reviewing what’s going on, given your life circumstances,” Perera says.