Whether it’s higher default contributions, means-tested government contributions or something else entirely, it’s clear Nicola Willis has something significant planned, writes Catherine McGregor in today’s extract from The Bulletin.

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A flurry of pre-budget spending promises

With Budget 2025 barrelling towards us this Thursday, the government is continuing to lay the groundwork with a series of hefty pre-budget announcements. Sunday brought news of $164 million for 24/7 urgent care services in several regional centres, while Friday saw an announcement of $577 million over four years for increased film and television production rebates.

Other recent announcements include $774 million earmarked for redress in state care abuse cases; $140 million for a new school truancy service; $100 million lift to the Elevate venture capital fund; $100 million for maths intervention teachers and tests; and $35 million to bolster Customs’ work on drug smuggling.

Will the KiwiSaver bar be raised?

For all the spending announcements, there are still plenty of budget areas where the government is keeping its cards close to the chest. Among them is KiwiSaver. Nicola Willis has made clear she wants balances to grow – and it’ll likely be through increasing the default contribution rate from the current 3%, the NZ Herald’s Jenée Tibshraeny reports (paywalled). The Retirement Commission wants it at 4% (with a 4% employer match), while keeping the minimum contribution rate at 3% for workers who cannot afford to pay more. “Introducing a higher default contribution rate would act as a signalling device to provide implicit advice on required savings levels,” the commission writes (PDF). What’s more, “due to the ‘stickiness’ of defaults it is anticipated that many people will remain at this default rate”.

The Retirement Commission is currently undertaking its three-yearly review of retirement income policies, with public submissions open until June 30.

Is the $521 a year safe? 

The other potential KiwiSaver change involves the government’s annual member contribution of up to $521, which Willis hasn’t ruled out means-testing. RNZ’s Edmunds talked to fund providers about the idea, and while some support better targeting, others voiced concern. “It shows where current Government priorities lie, when they are looking at cutting $1b of spending to help people’s futures, so they can fund an extra $1.5b in NZ Super next year,” said Rupert Carlyon of Kōura Wealth.

While Carlyon’s implied worst-case scenario – binning the contribution entirely – seems politically implausible, means-testing is still on the table. In a recent editorial, the Herald suggested top tax-bracket earners should lose their eligibility. “It would help free up funds and be an easy political sell. The majority of people, those earning less than $180,000, are unlikely to shed a tear for their wealthier mates losing their handout.”

(As a self-interested aside, I was pleased to see the commission recommend the government actually increase the contribution for those who do not benefit from an employer contribution – e.g. those who are self-employed like myself.)

Low balances underscore the need for reform

Whatever form Thursday’s changes take, there’s little dispute that KiwiSaver in its current form isn’t delivering strong enough retirement outcomes. Data for 2024 (reported by (again) RNZ’s Susan Edmunds) shows the average balance remains a modest $37,000, while women’s savings are on average around $8,000 less than men’s. That’s largely due to women taking significant breaks from paid work to raise children and being more often employed in part-time roles.

Retirement commissioner Jane Wrightson says that while the gender pay gap is narrowing, the KiwiSaver gap has proven stubbornly persistent. “Since women live longer on average than men and therefore have longer retirement periods to fund, for this demographic, a rethink is especially critical.” If Nicola Willis does announce an increase to minimum contributions this week, the numbers suggest many New Zealanders – especially women – will be better off for it.

Read more:

• ‘I was too careful’: How the retirement commissioner would save differently now