Raising default contributions is well and good – but many critics say making them compulsory is what’s needed most, writes Catherine McGregor in today’s excerpt from The Bulletin.
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Still talking as the clock ticks
The loudest warnings at last week’s NZ Economic Forum were about what one panel called the “silver tsunami” – and how ill-prepared New Zealand remains. As RNZ reported, Milford Investments chief executive Blair Turnbull was blunt: unless the retirement age rises to 72 or 73, “we can’t afford” superannuation. Treasury’s maths, he said, is unforgiving. By 2030 more than one million New Zealanders will be over 65; by 2060 there will be just two workers for every retiree, down from seven in the 1970s. With 40% of retirees relying solely on NZ Super and half of working-age people living pay cheque to pay cheque, the squeeze is obvious. Writing in the Sunday Star-Times (paywalled), editor Tracey Watkins said the debate felt like “Groundhog Day” – one she covered 15 years ago. The only difference now is the urgency. “We are still talking, while the clock keeps ticking.”
A story of missed chances
Watkins argues the country has squandered earlier opportunities to soften the blow. In the 1970s, Labour’s compulsory savings scheme was sunk by National’s “dancing Cossacks” scare campaign. In 1997, a referendum on Winston Peters’ compulsory savings proposal was rejected by 92% of voters. Both, she says, were massive missed opportunities that might have left New Zealand closer to Australia’s position today.
Across the Tasman, employer contributions to super sit at a compulsory 12%, with some workplaces paying more. By contrast, KiwiSaver’s minimum employer contribution is 3% – rising to 3.5% in April – and only applies if employees contribute themselves. National is campaigning on gradually lifting default rates to 6% for both employers and employees by 2032, but the scheme would remain voluntary. Writing in The Spinoff, Sydney-based New Zealander Nicola Russell says that distinction is crucial: Australia’s compulsory employer payment builds balances regardless of workers’ capacity to contribute, while New Zealand’s system leaves lower earners at risk of saving nothing at all.
Fixing KiwiSaver’s design flaws
If raising the retirement age is politically toxic, improving KiwiSaver may be more achievable – but it will still require boldness. In Stuff, Damien Venuto canvasses a range of proposals. Kernel Wealth’s Dean Anderson suggests redirecting the government’s $260 annual contribution into children’s accounts, funding KiwiSaver from birth to age 16 and building long-term wealth earlier. Kōura Wealth’s Rupert Carlyon argues the current tax settings blunt the incentive to save, pointing to Australia’s flat 15% tax on super contributions as something for NZ to emulate. Fisher Funds’ David Boyle and Simplicity’s Sam Stubbs say that lifting contribution rates is key and according to Stubbs, they must become compulsory for both employers and employees.
But structural tweaks will only go so far without political stability. Ana-Marie Lockyer of Pie Funds says what is missing is a durable cross-party commitment to staged increases that workers and employers can rely on. “Kiwis generally support saving for their own retirement. What they want is fairness and predictability along the way.”
When the rules feel too rigid
While much of the debate centres on getting more money into KiwiSaver, the Herald has highlighted what happens when someone needs to get it out. Teacher Kelly Sheridan, 53, was diagnosed with stage 3 triple negative breast cancer and sought to withdraw her savings to fund immunotherapy that is not publicly funded. Her application under the “serious illness” provision was declined because, under the legal test, she is not deemed at “imminent risk of death” within roughly 6–18 months. The alternative hardship route requires proof that other options have been exhausted.
Critics, including columnist Nadine Higgins and money expert Mary Holm, argue the rules are too narrow and fail to account for illnesses likely to prevent someone reaching 65. Higgins acknowledges the main risk of loosening the rules – the possibility that someone withdraws funds and later survives with little left for retirement. But ultimately, she concludes, “That choice should rest with the person whose life is on the line.”
