Greg Smith, investment specialist at Generate, asks whether KiwiSaver needs to change with the times.

As KiwiSaver nears its 20-year anniversary, is it time for a reset – with mandatory membership, higher minimum contribution rates, and perhaps a stronger focus on financial advice?

The coalition government has already committed to raising minimum KiwiSaver rates at the 2025 Budget, from 3 per cent to 3.5 per cent in 2026 and 4 per cent in 2028. But should we be aiming higher?

Since its 2007 launch, KiwiSaver has transformed the financial wellbeing of many New Zealanders and strengthened our economic resilience. Yet a major opportunity remains to expand our national savings pool and unlock greater long-term prosperity. Making KiwiSaver compulsory and lifting contribution rates substantially would ensure more Kiwis are prepared for retirement.

At Generate, we’ve seen first-hand how consistent contributions, financial advice and active investment management can make a meaningful difference to long-term outcomes. Our members who’ve received advice typically have higher KiwiSaver balances than the national average, showing the real value of informed decisions. Even modest increases in contribution rates can significantly boost retirement savings over time.

According to the Financial Services Council’s Financial Resilience Index 2025, only 44 per cent of New Zealanders feel prepared for retirement. The Retirement Commission found that raising contribution rates to 4 per cent for a median earner over a 40-year career could make savings last 30 per cent longer than under current settings. The case for higher contributions is clear.

The case for compulsion

The FMA KiwiSaver Annual Report 2025 shows 3.385 million New Zealanders enrolled, with total funds now exceeding $123 billion. Yet around 30 per cent of members aged 18-65 are not contributing. Making the scheme compulsory would bring over a million more people into active participation.

Despite strong growth, balances remain modest. The Retirement Commission estimated that at the end of 2024 the average KiwiSaver balance was $37,079. Only 12 per cent of members had more than $80,000 saved, while 17 per cent of those with less than $10,000 were already aged between 51 and 65 – fast approaching retirement.

Contrast that with what’s needed: Massey University’s Retirement Expenditure Guidelines suggest a single homeowner requires $273,000 (on top of NZ Super) for a “comfortable” retirement, and $181,000 for a “no-frills” lifestyle. A city-based couple would need roughly $1.03 million combined. The gap between what’s saved and what’s required is wide, and growing.

From default to deliberate

And while KiwiSaver is now being introduced in schools (a great step toward building financial literacy), there’s a missed opportunity among those already enrolled. Too many members remain in default funds, earning default results. With investing, time is your greatest friend, and the earlier members make active choices, the better their long-term outcomes.

The value of advice should be considered as part of the KiwiSaver reset. Research from Russell Investments found that professional financial advice can add around 4.5 per cent per year in value to a portfolio – and when compounded over decades, that difference can have a transformative impact on retirement savings.

At Generate, we know financial advice adds long-term value. Over 90 per cent of our members have joined through an adviser, and we have local advisers across the country ready to talk directly with new members to ensure their plan fits their goals.

Why now?

Rising living costs, wage stagnation and longer life expectancy highlight why Kiwis must save more than was envisaged when KiwiSaver began. Today’s retirees are living longer, healthier, and more active lives. As KiwiSaver approaches its 20th anniversary, a reset is timely to ensure the system remains fit for purpose.

Public attitudes toward compulsory saving have likely shifted since the 1997 referendum, when 91.8 per cent voted against it. That proposal required employees to contribute up to 8 per cent without employer support, effectively a pay cut. A modern version (potentially paired with offsetting tax cuts) could be far more acceptable. A poll of Generate’s social-media followers found around 80 per cent support lifting minimum contributions to 10 per cent.

Higher contributions, offset by tax adjustments, could be broadly inflation-neutral. Rather than fuelling consumption, redirected funds would boost savings, supporting long-term growth and financial stability.

Learning from Australia

Across the Tasman, Australia’s compulsory superannuation scheme demonstrates the power of long-term compulsion. Employer contributions currently sit at 12 per cent, helping grow a retirement pool exceeding A$4.2 trillion as at the end of 2024.
Superannuation has been central to Australia’s economic resilience and made it the world’s fifth-largest holder of pension assets.

Other nations such as Sweden, Switzerland, and the Netherlands (all with compulsory retirement-saving systems) have achieved similar success in improving financial security and wellbeing. The evidence is strong: compulsory saving with higher contribution rates works.

Broader benefits for New Zealand

Since inception, KiwiSaver has reduced the future retirement burden on the government, created a $123 billion domestic investment pool, and lessened reliance on foreign capital. KiwiSaver funds now help finance local companies, infrastructure and bonds, deepening our capital markets and improving corporate access to funding.

For members, KiwiSaver encourages saving over consumption, boosts financial security, and supports first-home ownership – more than 500,000 Kiwis have already used KiwiSaver savings for deposits.

The scheme has also lifted financial literacy and broadened participation in investing. Many funds offer valuable global diversification, giving members access to international markets and growth.

Returns, fees, and value

While fees are an important consideration, they’re only half the story – net returns are what ultimately determine outcomes for members. At Generate, we focus on delivering long-term value after fees. As at September 30, 2025, the Generate Moderate KiwiSaver Fund ranked number one for returns over 10 years* (after fees, before tax) according to Morningstar. This reflects our active investment approach, disciplined risk management, and commitment to consistent performance.

The results are evident in member outcomes – the average balance of Generate KiwiSaver members is around $45,000, significantly higher than the national average of $37,000. This suggests our members are not only engaging more actively with their retirement savings, but also benefiting from stronger long-term performance. It highlights how the right mix of disciplined investing, advice, and engagement can materially improve financial preparedness.

The path ahead

KiwiSaver has been a remarkable success story, but to secure the next generation’s financial future, the next logical step may be to make it compulsory and raise contribution levels meaningfully. Detailed analysis will be required on how to offset higher contributions through tax settings, but every major reform begins with a conversation.

At Generate, our mission is to help hardworking Kiwis achieve their savings goals and retire with comfort and confidence; through smart advice and a focus on long-term performance. As KiwiSaver turns 20, the discussion around compulsion and higher contributions is one we strongly encourage, because a stronger, better-managed KiwiSaver means a stronger New Zealand.

Generate is a Kiwi-owned investment manager helping over 180,000 New Zealanders grow their long-term savings through KiwiSaver and managed funds. This article is for general information only and does not constitute financial advice. All investments carry risk, and past performance is not indicative of future results. To see Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, go to www.generatewealth.co.nz/advertising-disclosures/. The issuer is Generate Investment Management Limited.

* Morningstar KiwiSaver survey September quarter end 2025. The Generate Moderate Fund ranked 1st out of 13 NZ Multi Sector Moderate Category Funds.