Combined KiwiSaver contributions of 12 per cent would likely be over-the-top for most income cohorts, according to the latest number-crunching by a group of NZ Society of Actuaries (NZSA) specialists.
In a new study, the Retirement Income Interest Group (RIIG) of the NZSA found both low- and median-earners would probably over-save under a 12 per cent KiwiSaver contribution scenario – a figure in line with the Australian superannuation system that the National Party pledged to match in a policy for the 2026 election but below the 20 per cent floated by NZ First leader, Winston Peters, as an ideal target.
Last week National also vowed to make KiwiSaver compulsory, abolish no-cause contribution holidays and seed newborns with a $1,500 kickstarter account if it wins the coming general election.
Under rules already in place, KiwiSaver baseline contributions increased to a combined 7 per cent this financial year and will rise to 8 per cent by April 1, 2028.
But the RIIG modelling suggests the 12 per cent contribution rate might be over-egging retirement savings for middle NZ, assuming uninterrupted payments into KiwiSaver, decent long-term returns and retention of the current universal pension eligibility age at 65.
“With a 6% contribution rate from the member and 6% contribution from the employer, a median earner may have an income immediately after retirement that exceeds their income before retirement, if they do not take a first homeowner withdrawal and if investment returns are favourable,” the report says.
In situations where the median income-earners avoid first-home withdrawals and annual returns average at least 4.5 per cent, the 12 per cent contribution rate would deliver retirement income above working-life wages.
And the 12 per cent equation is even less appealing for those on low incomes, the RIIG solutions suggest.
“For minimum wage earners a 6% KiwiSaver contribution may be excessive, as it could result in them having higher spending capacity after retirement than before. Higher spending capacity in retirement is not inherently undesirable,” the report says. “However, for this group the reduction in consumption before retirement may be more consequential, particularly during periods of higher expenses such as childcare or mortgage servicing.”
High-earning New Zealanders, though, would see a post-retirement drop in income under all three annual investment return assumptions (3.5, 4.5 and 5.5 per cent) – albeit the RIIG data ignores non-KiwiSaver assets.
“However, a suitable replacement rate for individuals in this [higher-income] group is likely to be a personal choice that will be made with advice,” the report says. “A replacement rate below 80% may be acceptable for many people in this group. Although their replacement rate is lower than median earners they will have more income in absolute terms.”
After weighing up the odds, the RIIG – comprising, Christine Ormrod, Colin Downie, Daniel Stoner, Kelvin Prisk and convenor, Ian Perera – opt for the middle ground in the KiwiSaver contribution debate.
“Overall, given current superannuation settings, we continue to think that a 5% member and 5% employer contribution is a suitable default level,” the study says. “This gives a better balance between pre-retirement and retirement spending capacity, particularly for lower earners.”