Guest Post: Time to change the record?

A guest post by Michael Littlewood:

Is anyone else a little tired of articles that tell us we aren’t saving enough for our retirement, or that the country can’t afford New Zealand Superannuation (NZS)? Most seem fuelled by KiwiSaver providers or financial advisers who tell us we don’t know what we are doing; also that we need the government to force us out of our apparent indifference. Or even that the financial sky is falling in, or will be.

Instead of acting as the voice for financial service providers, why don’t reporters do some research; ask some questions; demand answers?

1. Future cost of NZS: The Treasury tells us that the net cost of NZS in 2060 will be 6.0% of 2060’s estimated Gross Domestic Product (GDP), up from a current net 4.5% (2025 – NZSF-model-BEFU 2025). Will that really be unaffordable? Regardless of today’s debate, 2060’s taxpayers will decide whether 6.0% is too much to pay for NZS in 2060, just as taxpayers today seem to think that a net 4.5% is about right.

But what are other countries now paying?

The average cost of state pensions in the OECD today is a net 7.4% of those countries’ GDPs (Pensions at a Glance 2025). Somehow, taxpayers in those countries choose (and manage) to pay today quite a bit more than we expect to pay in 2060 (23% more). So, why is the estimated 2060 cost of NZS a particular problem? Is it because the Treasury says it is? Or is it just a question of future spending priorities And do we need to make those decisions today?

By the way, the presence, or absence, of the New Zealand Superannuation Fund doesn’t change any of this. The cost of NZS today and tomorrow is, and will be, the benefits actually paid. Those are unaffected by the workings of the NZSF.

2. KiwiSaver balances: Regardless of the amount of money in KiwiSaver and the endless analyses of average balances today and at our expected retirements, where is the evidence that Kiwis are actually under-saving for retirement? KiwiSaver is such a small part of the total net household assets of all New Zealanders (just 3.9%, according to Household financial data Table 1-5A December 2023, StatsNZ) that discussing KiwiSaver balances by themselves is virtually pointless. There was, of course, no evidence to support the 2026 lift in total contributions to 7% of employees’ pay, nor to the next increase to 8%. Those seem to be ‘answers’ to an unidentified problem.

And how much of the money now in KiwiSaver comes from ‘other’ savings (see point 5 below)?

3. How much is enough saving? Many commentators say that New Zealanders won’t have enough to live on when they reach retirement with endless calculations of average balances, average contributions and some guesses about investment income and the expected cost of living. These guesstimates are really pointless. Is anyone asking actual New Zealanders how much they want to have saved when they reach retirement?  How much do they have now? Oh and by the way, when do New Zealanders expect they might want to stop working?

Journalists should also note that private savings have nothing to do with the expected cost of NZS (point 1 above). We don’t have a means-test. Or is ‘more private savings’ code for a future means-test?

4. Do we know whether our retirement income framework is working? We do not know if today’s retired have the retirement they were expecting (or need). Until we have statistics that drill down to actual households to figure out what their retirement income aspirations might be (or have been), their current state of preparedness and their expected position at their chosen retirement ages, we will never know.  Asking New Zealanders what they think is pointless. For example, one couple’s aspiration might be to continue working after age 65 while they are able and then retire to live on NZS alone. That couple does not need anything in a KiwiSaver account and there can be no public policy justification to say that our couple should be saving specifically for retirement. 

The Retirement Commissioner now acknowledges that we need a longitudinal study of New Zealand households to find out what’s really happening (Review of Retirement Income Policies, 2025) but that didn’t stop the Review’s making many recommendations to change the way we do things, such as ‘more KiwiSaver’. Talk about firing policy shots in the dark!

5. Does anyone remember SoFIE? Before KiwiSaver started, StatsNZ tried to uncover some answers to questions 3 and 4 through a longitudinal study: Survey of Family Income and Employment, which ran from 2002 to 2010. SoFIE looked at what actual households were doing over an eight-year period. The Treasury wrote a series of reports based on SoFIE that, in summary, concluded:

• New Zealanders were probably slightly over-saving for retirement before KiwiSaver started in 2007 (Treasury report from 2004: Saving for Retirement: New Evidence for New Zealand; from 2007: Are Kiwis saving enough for retirement?  Preliminary evidence from SoFIE; and from 2009: Saving Rates of New Zealanders: A Net Wealth Approach); 

• Of KiwiSaver contributions, about one-third were ‘new’ savings, the rest being effectively transferred from other financial assets (Treasury report 2011 KiwiSaver: An Initial Evaluation of the Impact on Retirement Saving);

• KiwiSaver members seemed to have accumulated less net wealth than non-members (Treasury report 2014KiwiSaver and the Accumulation of Net Wealth). 

The authors of those reports will tell you that there were significant difficulties with the later tranches of data but we knew from SoFIE, before KiwiSaver started, that New Zealanders were probably saving ‘enough’ for retirement. That’s the only time we have ever asked or tried to answer those questions. So, was KiwiSaver the answer to a problem we didn’t have? Why have taxpayers spent billions of dollars subsidising KiwiSaver?

Any KiwiSaver provider which suggests we aren’t saving enough for retirement has no evidence to back that up. They might be right but we don’t know; and the Retirement Commissioner doesn’t know either. We can’t answer those questions today unless we have a new (better) SoFIE.

6. The obsession with ‘total remuneration’ employment contracts: This isn’t the right place to run all the arguments about whether employers should be ‘allowed’ to pay their employees under the principles of ‘total remuneration’. But if we needed to make anything compulsory on this, I strongly believe that ‘total remuneration’ should be the only acceptable way of forcing employers to behave in any particular way. The alternative ‘pay + benefits’ approach either saves employers money (by avoiding contributions for non-members) or shows that employers haven’t thought through the consequences of their current remuneration strategy. Either conclusion is, at best, unedifying. ‘Pay + benefits’ is simply unfair on employees who can’t, can’t afford or don’t need to join KiwiSaver.

7. KiwiSaver won’t/can’t fix the ageing ‘problem’: Today’s NZS is a claim on today’s economy.  So are today’s retirement savings (for current retirees). The same applies to tomorrow’s NZS/retirement savings. The answer to the population-ageing ‘problem’ is to grow the economy by more than we currently expect so that we can meet all those expected claims.

The mix between public and private provision doesn’t much matter unless you argue that KiwiSaver itself will grow the economy so that more KiwiSaver means more growth. The trouble with that line is with the evidence, or lack of it. Economists tend to suggest that the links between savings and investment and then between investment and growth are tenuous at best. It’s even possible that the links run the other way – more growth leads to higher savings so that savings are a consequence of growth, not a cause.

Getting really specific – how precisely will more KiwiSaver help the economic issues raised by an increase in the claims, both public and private, on tomorrow’s economy from an ageing population?

8. Why can’t KiwiSavers access their savings? I think KiwiSavers should have free access to their savings whenever they wish. After all, whose money is it? KiwiSaver providers of course like the restricted access but why does the government make rules about that?  Now that tax breaks have been largely withdrawn, what business is it of the government to tell savers they must wait until age 65? Doesn’t the government trust the owners of those savings to make decisions that are in the savers’ own best interests?

9. No KiwiSaver provider will agree with any of this: It really is pointless to ask KiwiSaver providers what changes they would like to see in the current regime. They will, of course, support strengthening the current contribution regime and further restricting access to savings. They are in the business of growing their schemes as their own incomes depend on more money and more members for longer. All that makes them deeply self-interested in calling for New Zealanders to do more under KiwiSaver.

In conclusion

A suggestion: why don’t journalists ask providers/advisers what they think about items 1 to 8 above? Don’t they trust New Zealanders to behave sensibly with their own money? Perhaps a SoFIE of the late 2020s might just produce similar answers to SoFIE of the 2000s. Just perhaps, New Zealanders might already be saving enough for retirement.

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