Bold Reforms Needed to Transform KiwiSaver for Future Growth

KiwiSaver has become an essential part of New Zealand’s retirement landscape, yet significant changes are necessary to ensure it meets the needs of future generations. Despite its success, recent statistics reveal that nearly 1.3 million members are not contributing, highlighting a critical gap that could jeopardize the financial security of many Kiwis.

The Financial Markets Authority reported a net increase of over 42,000 non-contributing members in the past year. While some of these individuals are retired or under 17 years old, a large number are working-age New Zealanders who have paused or stopped their contributions altogether. This trend is not surprising given the economic pressures many face today, as evidenced by the 44,000 Kiwis who withdrew a total of $443.6 million due to financial hardship in the year ending March.

Despite these challenges, there is optimism for KiwiSaver’s future. Projections indicate that the fund could reach $200 billion by 2030, driven by compound growth and consistent contributions. This potential underscores the need for a bold re-evaluation of how KiwiSaver can evolve beyond its current framework.

Addressing Contribution Rates and Investment Gaps

The introduction of more ambitious contribution targets is crucial. In Australia, the minimum contribution to their Superannuation system rose to 12% this year, while New Zealand’s rate will only reach 4% by 2028. This disparity could worsen over time unless New Zealand sets its sights higher. The recent proposal by Winston Peters to mandate a 10% minimum contribution reflects a necessary step in the right direction.

Implementing such a change would require careful planning but could significantly enhance the financial security of Kiwis and invigorate local capital markets. KiwiSaver’s design intended it to function as a second pillar of retirement income, supplementing New Zealand Superannuation. However, many working-age Kiwis find themselves at a disadvantage due to paused contributions and hardship withdrawals, which can severely impact long-term savings growth.

To rectify this, raising the minimum contribution rate, shared equally between employer and employee, could transform KiwiSaver from an optional benefit into a fundamental aspect of employment in New Zealand.

Enhancing Local Investments for Economic Growth

The way KiwiSaver funds are allocated is equally important as the contribution rates. As of March 2025, total KiwiSaver funds exceeded $128 billion, yet much of this capital remains invested offshore. Between June 2023 and March 2025, local investments rose from $44 billion to $52 billion, while overseas investments surged from $57 billion to $76 billion. This trend poses a risk of creating a cycle where diminished local investment stifles the growth of New Zealand companies, leading to increased reliance on foreign markets.

KiwiSaver schemes often invest overseas due to the scale and diversification benefits these markets provide. However, fostering an environment that encourages local investment could yield significant benefits for both the economy and the individuals invested. This is not about imposing state-directed investments, which could bring their own complications, but rather creating conditions that make investing in robust New Zealand companies via the NZX appealing.

The NZX offers transparency, governance, and liquidity that can be challenging to achieve through private investments. By aligning KiwiSaver funds with local businesses, the potential for capital growth could be substantial, benefiting individuals and the broader economy alike.

Revamping the approach to KiwiSaver is about more than just setting higher contribution rates; it challenges the current system and invites a rethinking of how to build a financially secure future for all New Zealanders. Currently, a significant number of individuals remain inactive in their contributions, and local capital markets are missing out on billions of dollars that could be revitalizing New Zealand businesses.

With ambitious reforms that combine increased contributions and strategic local investments, KiwiSaver can evolve from a successful initiative into a transformative force for New Zealand’s economic future. The potential exists, and with comprehensive planning and support, it is within reach.