Single parents face biggest shortfalls under higher contribution rates
Requiring New Zealanders to put more into KiwiSaver could leave some households paying down their mortgages more slowly or leaning harder on short-term debt, according to new analysis from the New Zealand Institute of Economic Research (NZIER).
In NZIER’s Insight 133 paper, Roshen Kulwant examined the trade-offs of making KiwiSaver contributions compulsory and lifting minimum rates. The paper argues that bigger retirement balances do not necessarily leave households better off once spending, debt, and other savings are taken into account.
The debate is live ahead of the 7 November general election, with Labour pledging to make employer KiwiSaver contributions compulsory from 1 July 2028 and lift the minimum employer rate to 6% by 2032.
Where the extra money comes from
NZIER pointed to Treasury modelling of the budget 2025 move to 4% contributions. Treasury assumed employers would recover 80% of their higher payments through smaller future pay rises. It also assumed that around 80% of employees’ extra contributions would be diverted from other saving, including mortgage principal repayments. Only the remaining fifth would come from reduced spending.
For households already saving outside KiwiSaver, that switch may change little. Those with nothing to redirect may need to cut spending or borrow more. NZIER said such households could hold more in KiwiSaver but have less in emergency savings, rely more on short-term debt, and “repay their mortgages more slowly”.
The paper also cites Kiwibank’s 2026 State of Savings Index, which found 40% of respondents had taken on debt in the previous year to cover higher living costs.
Banking data points to some easing, however. The number of customers granted hardship status fell 9.7% to 5,562 in the six months to June, according to New Zealand Banking Association figures on home lending.
Single parents most exposed
Using Stats NZ’s Household Economic Survey, NZIER modelled how employee rates of 4%, 6%, and 8% would affect the income left after tax, Accident Compensation Corporation (ACC) levies, KiwiSaver contributions, and average household spending. Higher rates reduced the income left over for every household type.
Single parents earning $50,000 or $75,000 recorded the largest shortfalls at every rate. Couples each earning $75,000 with two children stayed in positive territory at 4% but fell short of average household spending at higher rates. NZIER stressed that the scenarios exclude Working for Families and other support, so they should not be read as an affordability threshold.
Reduced support adds pressure
Members’ responses vary. ANZ Investments said increasing KiwiSaver contributions remains a challenge for many, although nearly a third of its over-55s who recently changed their rate chose the 10% maximum.
Recent reforms halved the maximum annual government contribution to $260.72 and removed it entirely for people earning over $180,000.
NZIER said that combining compulsion and higher minimum rates with lower government support “asks households to save more without addressing the constraints some already face”.
It said any proposal should first pinpoint which households face inadequate retirement incomes and weigh how much extra saving would strain their budgets today.
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