What Needs to Change With KiwiSaver?

Date Jun 7, 2021
Blog category Kiwisaver
By Staff Writer

Kiwis today are more conscious about saving for the future, according to a 2020 Sharesies study. KiwiSaver is one of NZ government's initiatives in getting people to start saving and investing early. KiwiSaver offers low-risk investments, and allows Kiwis to save more money to help them prepare for their retirement, first house, and even moving abroad. If your goal is to save money for retirement, think of KiwiSaver as that one secure way to grow your money.

The government offers a lot of benefits to attract and encourage more Kiwis to save. This includes Employer Contribution, a 50 cent contribution from the government for every dollar you put into your KiwiSaver account (up to $521.43 annually), and an opportunity to withdraw your savings to help you buy your first home if you've been a member for at least three years.

Overall, KiwiSaver is a great way to save money. The question now is, is it really for everyone? As mentioned, it's the NZ government's initiative to help New Zealanders save, and while it's ideal for those who fall under the upper and middle class, what about those who are living week to week?


The thing about KiwiSaver is it doesn't allow you to withdraw money right away unless your reason is one of the following:

  • You're buying your first home
  • You're moving overseas
  • You have health problems/a serious illness


  • Bankruptcy
  • Paying tax liability
  • Relationship property

This is to make sure you don't touch or spend your money on things you don't really need or impulsively use it on unimportant things. But what about those with low incomes that could use their KiwiSaver funds to make do?

According to research, 3 in 10 NZ households are living week to week. These people simply just can't spare a thousand dollars to join KiwiSaver. Today, there are around 3 million KiwiSaver users, but a third of these people are either inactive or inconsistent in contributing money or not contributing at all.

It's also important to note that some of these people with dormant accounts are either too young or too old (under 18 or over 65 years old), self-employed, unemployed, etc. And then, there are more than 200,000 people who have chosen to opt out due to very low incomes, and more than 100,000 are on saving suspensions. That's almost 1 million Kiwis who aren't getting the necessary help and support they need from the scheme.

What needs to be changed?

For starters, the government needs to make KiwiSaver more accessible to Kiwis with low incomes, and redirect its goals into catering for those who actually need it. Right now, people are only allowed to withdraw for specific reasons, so it might be better for them to consider more flexible regulations for the users.

The current policy isn't too friendly to those with low incomes:

    • Those who are self-employed or working as contractors don't benefit from the Employer Contributions, so increasing their savings is more challenging, and it will take more time for them to save
    • Those who are unemployed/self-employed/working as contractors have to make their contributions manually, which can be a disadvantage since it requires an effort and might discourage members to contribute
    • The rules for withdrawing due to financial hardship can be tasking and hard since members have to prove all other options to get them out of debt have been exhausted. They must also prove that they can't afford living expenses, suffer a severe health problem, or don't have money to pay for funeral expenses.

In fact, KiwiSaver hardship application withdrawals have increased by 41% last year. A proof that these KiwiSaver policies are not sustainable in the long run and might just drive many Kiwis to get expensive loans, which defeats the purpose of saving. What's worse, withdrawing and closing your account means losing the government subsidies you've acquired.

Making the scheme more flexible — one that accommodates financial setbacks is a good start.

Another key point to acknowledge is that those who belong in the upper class have more access and opportunities to increase their financial assets, most of which aren't available to Kiwis who belong in the lower class. Basically, KiwiSaver is excellent if your main objective is to save for your retirement or for a house deposit. It's a good initiative with good intentions but has a design that might only bring more Kiwis into debt with no other alternatives to offer.

Another approach the government can consider would be making the first few thousands of a KiwiSaver account more accessible, especially to those with lower incomes. Rules for withdrawals can also be less strict as long as the reason for withdrawing is justifiable. The main goal of KiwiSaver is still to help people save up for their future, so incentives for those who are consistent in saving up and doesn't withdraw their money often can also be a good thing to add.

KiwiSaver has a long way to go and may need to take different approaches to find the right one that will be good for all Kiwis, but acknowledging the faults in its design can be a good start.

All in all, joining KiwiSaver is still better than not saving at all. If your main goal is to save for your retirement or purchase your first house, it's a great option to help you reach these goals.

Find the perfect KiwiSaver scheme today, here at CompareBear!