The Coalition Government is lifting default KiwiSaver rates to 4% over the next three years and Commerce Minister Scott Simpson wants to go further if possible

Commerce Minister Scott Simpson says the government wants to gradually lift KiwiSaver contribution rates towards Australia's 12% superannuation minimum.

Speaking at the launch of Kiwibank’s latest State of Savings Index report, he said recent changes to the scheme were limited by tough economic conditions.

Finance Minister Nicola Willis had to “find a fine balance” between raising contributions and recognising that many people needed money for immediate costs.

That led to “relatively small changes” to the scheme for now, but she had signalled there would be “further increases over time,” he said.

“I occasionally look with envy across the Tasman to see that Australians are now contributing, I think it's a minimum of 12% into their superannuation scheme, and the benefits that accrue to them at that scale are obvious to folks like us in this room.”

Asked how quickly NZ could reach 12%, Simpson said contribution rates were ultimately a decision for Willis, but he expected increases would continue.

“The decisions that were made in this year's budget indicate an increase coming into effect [in April] next year, and then a further increase the year later, so that a betting person would say that shows the direction of travel and trend,” he said.

“It’s a personal view, but I think that KiwiSaver can be tweaked to the benefit of New Zealanders and future generations, most certainly.”

A paper prepared by the Retirement Commission in 2024 estimated that a 3% contribution rate, combined with NZ Super, would support a median-earning retiree on 70% of their working income for 15 to 25 years. A 4% rate would extend that to 20 to 30 years, and a 6% rate to 30 to 55 years.

Budget at best

Legislation passed as part of Budget 2025 sets the default minimum contribution rate for both employers and employees at 3.5% from April 2026, rising to 4% in April 2028.

Savers will be able to temporarily opt down to 3%, but will automatically return to the higher rate after 12 months unless they renew the exemption.

Other changes include halving the maximum Government contribution from $521 to $260, excluding earners over $180,000, and extending eligibility to 16- and 17-year-olds.

Kiwibank’s State of Savings report found 58% of businesses supported the KiwiSaver changes, and 60% considered the budget generally “pro-growth”.

The report is based on an annual survey of 1,040 consumers conducted by Talbot Mills Research and a separate survey of 303 business leaders. Both were carried out in late June.

It found 51% of consumers had a savings goal, but only 43% saved regularly. Nearly 70% said the high cost of living was the main barrier to saving, and 48% had withdrawn from their long-term savings to cover immediate costs.

People under 30 were far more likely than older groups to have a defined savings goal (76%) and stick to a budget (85%), with 23% saying they had saved more than last year.

This challenges the stereotype that young people aren’t willing to work hard or make sacrifices to achieve financial stability or buy a home. The survey suggests they are more careful and proficient with money than older generations.

The survey also showed a divide between large and small businesses.

Among firms with more than 100 employees, 85% reported an improved financial position compared to last year, versus 55% of those with more than 11 staff, and just 26% of sole operators.