Do tighter belts bring brighter golden years? NZIER Insight 133

New Zealand Institute of Economic Research (Inc)
Media Release, 19 October 2026

For immediate release

A new NZIER Insight examines the household budget implications of higher contribution rates and the role of people’s saving behaviour in assessing changes to KiwiSaver. 

“Debate often centres on contribution rates, incentives and whether participation should be compulsory. But changes to KiwiSaver have trade-offs, and the acceptability of trade-offs depends partly on the problem we’re aiming to address,” says NZIER Senior Economist Roshen Kulwant.

The Insight calls for proposed changes to be assessed against a clear objective, evidence of the problem, and likely responses from households and employers.

“Are policy-makers concerned that, under the current settings, people won’t have enough saved for retirement, that some groups are saving too little, or that people struggle to save consistently? These are related questions, but they do not necessarily call for the same response.”

The Insight highlights that increasing KiwiSaver balances alone is not enough to determine whether a policy has achieved its purpose. Some households may fund higher compulsory contributions by redirecting other saving to KiwiSaver, while others may cut spending in other areas, and some may be forced deeper into debt.

“KiwiSaver is one part of how people prepare for retirement. A larger KiwiSaver balance does not necessarily translate into an equivalent increase in total saving. We need to consider what happens to people’s broader finances. Higher employee contributions also leave less take-home pay for current expenses. That may be a worthwhile trade-off, but we need to be clear about the expected benefit and who bears the cost – and any possible harms,” says Kulwant.

The same need for a clear objective applies to compulsory participation. People may not contribute because they cannot afford to, or because they don’t see KiwiSaver as the best place to save.

“Compulsion could help some people save more consistently, but non-participation in KiwiSaver alone does not tell us whether a household is saving too little for retirement. Understanding why people are not contributing matters when deciding how to respond.”

Before changing KiwiSaver settings again, policy-makers need to clearly define the problem, explain how the proposed change would address it, and identify how we would measure success.

For further information, please contact:
Roshen Kulwant
Senior Economist
027 376 8258
roshen.kulwant@nzier.org.nz