Introduction

The National Party's recent announcement to gradually increase KiwiSaver contributions to match Australia's 12% rate represents a significant step forward for New Zealand's retirement savings landscape. At DecisionMakers, we believe this policy change will benefit both individuals and the country as a whole, despite some understandable concerns about affordability.

Historical perspective: Overcoming contribution concerns

When KiwiSaver first launched, there were widespread fears that New Zealanders wouldn't be able to afford the contributions. However, these concerns proved unfounded. The reality is that people quickly adapted to not seeing this money in their take-home pay, and the same psychological principle will apply to the proposed increases.

The gradual nature of the increases—starting at 3.5% from April 2026 and rising by 0.5% annually until reaching 6% by 2032—means most people won't notice the impact on their lifestyle. For perspective, if employers aren't providing at least 0.5% pay increases year-on-year, there are likely broader workplace issues at play.

The power of compounding: Why contribution rates matter most

As financial advisers, we regularly help clients optimise various aspects of their KiwiSaver arrangements—ensuring appropriate fund selection based on age and goals, choosing providers with competitive fees and strong investment processes, and aligning investments with environmental, social and governance preferences. While these peripheral adjustments are valuable, they pale in comparison to the impact of contribution rates.

Think of it like tending a garden: you can choose the best fertiliser and optimal watering schedule, but the size of your plot ultimately determines your harvest. Similarly, while fund selection and fee management matter, your contribution rate is the primary driver of your retirement outcome.

Real-world impact

According to National's projections, a 21-year-old earning $65,000 today would retire with approximately $1.4 million under the new contribution structure—around $400,000 more than under current settings. This demonstrates the profound long-term impact of seemingly modest increases in contribution rates.

Special considerations for different groups:
Self-employed New Zealanders: A missed opportunity

Statistics NZ data show 18.5% of New Zealand's workforce is self-employed—a substantial portion potentially missing out on KiwiSaver benefits. Self-employed individuals must make intentional choices to contribute to KiwiSaver, as they're not automatically enrolled through the PAYE system.

For self-employed New Zealanders, focusing solely on short-term business cash flow can be detrimental to long-term financial security. Building personal retirement savings alongside growing a business provides crucial individual protection and financial diversification.

Balancing KiwiSaver with debt reduction

A common question we encounter is whether to maximise KiwiSaver contributions or focus on debt repayment. The answer typically depends on employer matching arrangements. If your employer matches contributions up to a certain percentage, maximising that match provides a guaranteed 100% return on investment. Beyond the matched amount, directing funds toward debt reduction often provides superior guaranteed returns.

Beyond retirement: KiwiSaver's hidden benefits

KiwiSaver isn't just about retirement planning. The scheme provides important safety nets that many New Zealanders overlook. Members can access funds in cases of terminal illness, providing crucial financial support during difficult times—particularly valuable given New Zealand's generally under-insured population.

Similarly, hardship provisions allow access during unemployment or significant financial distress, meaning higher contributions build a more substantial emergency cushion alongside retirement savings.

The importance of individualised advice

While the proposed contribution increases benefit most New Zealanders, individual circumstances vary significantly. Some people struggle with discretionary spending and benefit from the forced savings discipline of higher KiwiSaver contributions. Others might benefit from diversified investments alongside their KiwiSaver, provided they have the discipline to maintain long-term focus.

Financial planning software helps illustrate different scenarios, showing clients what their retirement might look like under various contribution and investment strategies. This visualisation helps people understand not just average retirement outcomes, but what's required to achieve their specific retirement goals.

Conclusion
National's proposed KiwiSaver changes represent sound policy that addresses New Zealand's retirement savings challenge while building domestic investment capital for infrastructure and economic growth. The gradual implementation recognises affordability concerns while ensuring meaningful improvement in retirement outcomes, particularly for younger generations.

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At DecisionMakers, we support this initiative as beneficial for both individuals and the country's economic future.

Every New Zealander's situation is unique, and we strongly recommend seeking advice from a qualified financial adviser.

At DecisionMakers, our advisers are available to discuss your financial questions in a 45-minute complimentary consultation, available in person at our Takapuna or Tauranga offices, or via video or phone call.

These conversations consistently help people clarify their financial direction and make more informed decisions about their financial future. This is also a chance to determine if you will benefit from engaging with a DecisionMakers adviser.