NZSA Disclaimer
Last week’s NZSA panel discussion featuring Dean Anderson (from Kernel Wealth) and Greg Smith (from Generate), facilitated by NZSA CEO Oliver Mander, offered a timely and candid examination of New Zealand’s retirement savings framework. The conversation ranged from policy design and political risk through to investor behaviour and the emerging challenge of decumulation. What emerged was a clear message: KiwiSaver has been a success—but its next phase will require discipline, clarity, and a willingness to confront difficult trade-offs.
A System Worth Protecting—But Not Diluting
Both panellists agreed on a fundamental point: KiwiSaver, now approaching its 20-year anniversary, is a success story. With approximately $140 billion in assets and over 3 million members, it has created a savings culture that did not previously exist in New Zealand. As Smith noted, without it, retirement outcomes would rely almost entirely on NZ Superannuation—widely acknowledged as insufficient for most New Zealanders’ expectations.
However, Anderson struck a more cautionary tone. His concern is not with KiwiSaver itself, but with the increasing risk of political interference. In his view, there is a growing tendency for policymakers to “nibble at the edges”; introducing targeted changes aimed at specific voter groups, rather than preserving the system’s core simplicity and purpose. He noted the recent changes made to allow rural service workers to access their KiwiSaver funds. Laudable indeed, but a clear conflation of a societal ‘good’ with an intrinsic purpose.
The tension between simplicity and political responsiveness was a recurring theme. KiwiSaver’s strength lies in its clarity: a centralised, largely uniform system with consistent rules. Undermining that simplicity risks eroding both confidence and long-term outcomes.
Contribution, Engagement, and the Education Gap
Despite its scale, KiwiSaver still faces a fundamental participation issue. Of the 3.3 million enrolled members, only around 2.3 million are actively contributing. That leaves roughly one million New Zealanders disengaged from the system.
Smith framed this as an education challenge. Encouragingly, he noted a shift in perception; KiwiSaver is increasingly viewed not as a “pay cut” but as a mechanism for funding future lifestyle. Higher voluntary contribution rates (6 -10%) are becoming more common among engaged investors.
Anderson, however, highlighted a more troubling statistic: very few people opted out of the recent contribution rate increase (from 3% to 3.5%) that took effect on April 1st, despite cost-of-living pressures. His interpretation was stark: many have simply not yet noticed the change. This speaks to a deeper issue. A large portion of the population still does not understand that they are investors. Behaviour during market volatility, such as switching to conservative funds during downturns, continues to demonstrate a lack of basic investment literacy.
The panel’s conclusion was clear: financial education must improve, and quickly. The rollout of financial literacy programmes in schools is a positive step, but more structural initiatives may be required.
Policy Reform: Incremental Tweaks or Structural Change?
The discussion turned to potential policy reforms, with Anderson advancing several proposals aimed at improving both equity and long-term sustainability.
One of the most significant was the decoupling of KiwiSaver access from NZ Superannuation eligibility. Under this model, KiwiSaver withdrawals would be available from age 60, while NZ Super eligibility would gradually increase to 67.
The rationale is twofold: NZ Super would remain a universal “backstop” to prevent poverty, while KiwiSaver would become the primary vehicle for lifestyle funding in retirement.
This approach introduces flexibility, allowing individuals to tailor retirement timing based on personal circumstances. It also acknowledges demographic realities; New Zealanders are living longer, with many facing 25 – 30 years in retirement.
However, Smith cautioned against over-complication. While acknowledging the merit of reform, he emphasised the importance of maintaining a simple, universal system. Introducing differential access based on occupation or income risks creating administrative complexity and unintended consequences.
The panel also touched on means testing, already partially introduced through income thresholds on government contributions. This signals a potential shift away from universality—an area likely to generate significant debate in future policy cycles.
Inequality, Demographics, and the Role of Early Intervention
A particularly compelling segment of the discussion focused on inequality and demographic disparities.
Anderson highlighted the need to address structural gaps, including:
- Lower participation among younger cohorts
- The gender savings gap
- Limited engagement from the self-employed
His proposed solution was both simple and ambitious: redirect government contributions towards children, effectively creating a “Kids KiwiSaver” scheme. Under this model, annual contributions would be made from birth through to age 16, providing a meaningful starting balance and fostering early engagement. After all, a young person entering the workforce with $10,000 – $20,000 already invested is far more likely to engage with long-term saving than someone starting from zero.
This proposal also addresses a concerning trend: the number of under-18 KiwiSaver accounts has halved over the past decade following the removal of earlier incentives.
For NZSA, this aligns closely with broader policy priorities around investor participation and financial literacy.
The Property Myth and a Generational Shift
One of the more provocative insights came from the panel’s view on property as an investment class.
Historically, New Zealand’s wealth model has been heavily reliant on residential property. However, Anderson argued that this paradigm is breaking down. Structural tailwinds such as declining interest rates, rising leverage, and dual-income households have largely expended their benefits.
In contrast, KiwiSaver and equity market investing are increasingly viable alternatives. Anderson cited modelling suggesting that a 25-year-old today could achieve comparable retirement wealth without owning property, simply through disciplined investment in KiwiSaver and equities.
This represents a significant cultural shift. The next generation appears less committed to property as the primary wealth-building vehicle, driven by affordability constraints, lifestyle preferences, and improved access to financial markets.
For policymakers, this raises important questions about capital allocation and economic productivity.
Decumulation: The Next Frontier
While much of the KiwiSaver conversation has focused on accumulation, the panel emphasised that decumulation (the process of drawing down retirement savings) will become increasingly important.
Two key behavioural risks were identified:
Over-conservatism at retirement: Many investors shift entirely into conservative funds at age 65, despite having decades of investment horizon remaining. This can significantly reduce long-term returns.
Under-spending in retirement: Conversely, some retirees are overly cautious, fearing they will run out of money. This leads to unnecessarily constrained lifestyles and, in some cases, large unspent balances at death.
Anderson argued that better advice and planning are essential to address these issues. Retirement should not be treated as a single event, but as a multi-decade financial journey requiring ongoing strategy. This is an area where New Zealand lags other markets, particularly in the availability of decumulation-focused products and tools.
Fees, Performance, and the Value Debate
The discussion also touched on the perennial debate between active and passive management.
Smith defended the role of active management, arguing that top-quartile managers can justify higher fees through consistent outperformance. He emphasised the importance of long-term evaluation, rather than short-term performance comparisons. Anderson, representing a low-cost, passive-oriented model, highlighted the role of technology and scale in driving down fees. He also pointed to the broader transformation underway in financial services, with digital platforms reshaping how investors interact with their portfolios.
For investors, the key takeaway is that fees should be considered in the context of value, not in isolation. The right choice will depend on individual circumstances, risk tolerance, and investment philosophy.
A Looming Wealth Transfer
Finally, the panel addressed what may be the most significant macro trend: an estimated $1.6 trillion intergenerational wealth transfer over the next 15–20 years.
This presents both an opportunity and a challenge. Anderson suggested that earlier transfers, potentially from grandparents directly to grandchildren, could improve capital allocation and economic productivity. The panel also cited examples of retirement planning that did not rely on a single inheritance event, but allowed inter-generational wealth transfer at a time when it would be of most value to future generations. This idea challenges traditional inheritance norms but reflects a broader shift towards more active, purpose-driven wealth distribution.
NZSA View: Time for Leadership, Not Incrementalism
From an NZSA perspective, the discussion reinforces several key priorities:
- Protect the integrity and simplicity of KiwiSaver
- Improve financial literacy and investor engagement
- Address structural inequalities through targeted, evidence-based policy
- Develop robust decumulation frameworks
- Encourage long-term, productive capital allocation
KiwiSaver has reached a critical juncture. The foundations are strong, but the next phase will require careful stewardship. Incremental tweaks will not be enough. What is needed is a clear, coherent vision—one that balances individual responsibility with systemic resilience.
As the election cycle approaches, NZSA will continue to advocate for policies that strengthen New Zealand’s savings culture and deliver better outcomes for all investors.
The conversation has begun. The challenge now is to ensure it leads to meaningful action.
Oliver Mander