[Weekly Wrap] What to make of the Budget's KiwiSaver changes

Friday, May 23rd 2025, 3:26PM

Actually a little underwhelming.

One of the questions in my mind is where did these ideas come from. The financial services sector has been united in to review KiwiSaver and make changes. It was keen to engage with government and work through the issues.

Indeed former Commerce Minister Andrew Bayly had a review on his mind, but it seems there has been no review and little engagement behind the changes made in the Budget.

Not surprisingly the sector has welcomed an increase in contribution rates. And their voice has been largely united saying it was a move in the right direction but not big enough.

The fact that employees can opt out for a year. Then opt out again for another year is the achilles heal of this tepid increase. It would be no surprise to see many members opt; maybe with the encouragement of their employer as the increases are more costs to their business.

Chopping the government contribution in half is mean-spirited. This is the second time it has been done and now and will largely dilute the incentive to join KiwiSaver to an ineffective one.

Pathfinder founder and co-chief executive sums it up nicely: “Halving the contribution doesn’t mean the impact of the incentive is also simply halved. Incentives don’t work like that. Halving it to 25 cents significantly diminishes the perceived value - I’d be surprised if it continues to turn the dial.”

To me it appears cynical and rather like the pay equity situation a raid by the government to make its budget work.

If my memory serves me correctly Michael Cullen introduced the government contribution not just as an incentive but the way of giving taxpayers some of their money back in a prudent way which was not inflationary and helped people save for retirement.

In a way it was a sort of tax cut.

This government has, I would suggest, done a reverse tax cut.

Seriously of the government, and politicians were serious about retirement issues then it would not be the KiwiSaver contribution they should look at but rather the cost of NZ Superannuation.

This is the largest single expense the government faces yet the politicians are too chicken to address it.

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