Do tighter belts bring brighter golden years? NZIER Insight 133

Would higher KiwiSaver contributions improve retirement savings, and what would households need to give up today? This NZIER Insight examines the trade-offs of higher contribution rates, using illustrative scenarios to explore how the pressure on household budgets varies across income levels and household types.

We also consider how households might adjust their spending, other saving and borrowing, and why higher KiwiSaver balances may not translate into an equivalent increase in total retirement saving. The discussion highlights the importance of defining the problems that higher contributions or compulsory participation are intended to solve, and of understanding households’ differing ability to respond.

NZIER Insights are short notes designed to stimulate discussion on topical issues or to illustrate frameworks available for analysing economic problems. They are produced by NZIER as part of its self-funded Public Good Programme. The purpose of NZIER’s Public Good Programme is to inform debate and educate on important economic and policy issues facing Aotearoa New Zealand. More information on NZIER’s Public Good Programme can be found at https://www.nzier.org.nz/public-good.