Labour sets out KiwiSaver overhaul plan

Pension savings documents and coin jar on office desk illustrating proposed KiwiSaver overhaul plan

Key Points

01Labour proposes compulsory employer KiwiSaver contributions if elected
02Employer contribution rate would rise to 6% by 2032 under the plan
03Default employee contribution would be set at 4% with more flexibility
04Policy targets low participation, with over 1m members not contributing

Labour outlines major KiwiSaver reforms

The New Zealand Labour Party has unveiled a comprehensive package of KiwiSaver changes it says it would implement if it wins the next election. The policy centres on making employer contributions compulsory and progressively lifting the employer contribution rate to 6% by 2032. The overhaul is framed as an effort to strengthen retirement savings and broaden participation in the national savings scheme.

Labour’s plan addresses both how much money flows into KiwiSaver and how consistently contributions are made. By tying the proposed 6% employer rate to a multi-year timeline ending in 2032, the party sets out a gradual path rather than an immediate shift. The measures would apply nationwide and would represent a significant change in the way KiwiSaver is funded by employers.

Changes to employer contribution rules

Under the proposal, employer KiwiSaver contributions would become compulsory, removing discretion over whether to participate. Employers would also be required to keep making KiwiSaver payments even when employees reduce or temporarily pause their own contributions. This is intended to maintain a steady flow of employer funds into members’ accounts regardless of short-term financial pressures on workers.

Labour would extend employer contribution obligations to workers aged over 65, a group that is currently in or approaching retirement. The policy also specifies that employer contributions would continue while an employee is on paid parental leave. In addition, new total-remuneration contracts that absorb employer KiwiSaver contributions into salary would be banned, separating retirement savings from base pay in future agreements.

Employee contribution settings and flexibility

On the employee side, Labour proposes to set the default KiwiSaver contribution rate at 4% of income. This default applies to members who do not actively choose a different rate. At the same time, the party would remove the minimum contribution requirement, allowing members to contribute less than current minimums or to reduce payments more easily when under financial strain.

By combining a 4% default with greater flexibility, the policy aims to balance automatic saving with the ability to adjust contributions. Workers facing tight budgets could lower their contributions without losing access to employer payments, because employers would continue contributing even when employee contributions are paused or reduced. This design focuses on maintaining contributions from employers as a stable component of retirement saving.

Addressing participation gaps in KiwiSaver

Labour leader Chris Hipkins highlighted significant participation gaps in KiwiSaver as a rationale for the proposed changes. He said more than one million working-age KiwiSaver members are currently not contributing to their accounts. In addition, 83,400 members are on savings suspensions, meaning their contributions are temporarily halted.

Despite these participation issues, Hipkins noted that KiwiSaver funds have grown to more than NZ$138 billion. The proposed reforms are positioned against this backdrop of large accumulated savings but uneven engagement among working-age members. By strengthening employer obligations and adjusting employee settings, Labour’s package is presented as an attempt to lift overall retirement savings and participation if the party forms the next government.

Key Takeaways

01Labour’s KiwiSaver package combines stronger employer obligations with more flexible employee contribution rules to keep retirement savings flowing even in times of financial stress.
02Extending compulsory employer contributions to workers over 65 and during paid parental leave would broaden coverage across key life stages if the policy is implemented.
03Participation concerns, including more than one million non-contributing working-age members and tens of thousands on suspensions, are central to Labour’s argument for reform.
04The target of a 6% employer contribution rate by 2032 signals a long-term approach to increasing retirement savings rather than an immediate, one-off change.

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