10 Things You Need to Know About Kiwi Saver

KiwiSaver: Overview and 2024 Update

1. Regulatory Framework

KiwiSaver is a voluntary, work-based savings initiative introduced in 2006 to help New Zealanders save for retirement. It is regulated by the Financial Markets Authority (FMA) under Part 2 of the Financial Markets Authority Act 2011.

2. Understanding Your KiwiSaver Balance

The value of your KiwiSaver account is referred to as your "member accumulation." This includes:

• Your personal contributions.

• Any employer contributions (vested).

• Government contributions (historically up to $521.43 per year, potentially reducing to ~$260 in the future).

These contributions are invested by your KiwiSaver provider (e.g., banks or investment firms). Your account balance reflects both contributions and investment returns. If your provider earns positive returns, your balance increases; with negative returns, your balance may decrease. Over the last five years, the market has shown volatility, with alternating years of gains and losses. 

3. Latest KiwiSaver Statistics (As at 31 March 2024)

According to the FMA KiwiSaver Annual Report 2024:

•  Total KiwiSaver funds: $111 billion (crossing the $100 billion milestone).

  • Annual contributions: $11 billion.

  • Withdrawals: $5 billion.

  • Net inflow: $6 billion.

  • Annual investment returns: $13 billion.

  • Total members: 3.3 million (approx. 62% of New Zealand’s population of 5.2 million).

Although the report highlights a 19% return on investment, this reflects a rebound from previous declines and does not represent a consistent long-term return.

4. KiwiSaver vs Australian Superannuation

While KiwiSaver has grown substantially, it remains modest compared to Australia's superannuation system, which exceeds AUD $4 trillion. However, Australia:

• Has a population ~5x larger.

• Has operated its scheme longer.

• Requires higher contribution rates.

If New Zealand’s KiwiSaver matched Australia’s scale, it would equate to about $500 billion. This comparison highlights the growth potential for KiwiSaver.

5. Investment Preferences

According to the same FMA report:

• 50% of funds are in growth funds.

• 28% in balanced funds.

• 20% in conservative funds.

• 2% remain in default funds.

Out of 3.3 million members, only 2 million actively contribute. The remaining 1.3 million have accounts but are not currently contributing.

6. Broader Economic Benefits

KiwiSaver is privately owned by its members but serves national interests:

• Funds can be invested domestically, reducing reliance on foreign capital for infrastructure (e.g., roads, hospitals).

• Government bonds can be purchased by KiwiSaver funds, keeping interest payments within New Zealand.

• With more retirees self-funding through KiwiSaver, pressure on New Zealand Superannuation is reduced.

As New Zealand faces a demographic shift with fewer workers supporting more retirees by 2051, building KiwiSaver balances becomes increasingly important.

7. Future Direction

The government is considering:

• Increasing the default contribution rate from 3% to 4%, possibly 5% in the future.

• Encouraging higher national savings to ensure long-term sustainability of retirement support. 

8. Choosing the Right Fund: Left, Right, or Sitting on the Fence?

• KiwiSaver offers a range of fund options, each with varying levels of risk and return. Understanding your risk appetite and retirement timeline is essential when selecting a fund. You can think of the options in three broad categories:

• Conservative Fund – “Left side”

  Lower risk, limited volatility, and modest returns. Ideal for members approaching retirement or those with a low risk tolerance who prefer stability over higher returns.

• Growth Fund – “Right side”

  Higher risk, greater volatility, but with potential for stronger long-term growth. Suitable for younger investors or those with a longer time horizon and higher risk tolerance.

• Balanced Fund – “Sitting on the fence”

  A middle ground between conservative and growth. Offers a balanced mix of risk and return. Appropriate for those who want moderate growth without excessive volatility.

According to the latest FMA report:

• 50% of members have chosen growth funds.

• 28% are in balanced funds.

• 20% prefer conservative funds.

• The remaining 2% are still in default allocations.

• While 3.3 million New Zealanders are enrolled in KiwiSaver, only about 2 million are actively contributing. The rest—around 1.3 million—have opened accounts but are not making regular contributions.

9. Future Direction

Why KiwiSaver Matters – For You and the Country

• KiwiSaver is not just a retirement savings tool — it plays a strategic role in strengthening New Zealand’s economy. When individuals save through KiwiSaver:

• The country builds a pool of capital that can fund major infrastructure projects (e.g. roads, hospitals, public works), reducing reliance on foreign borrowing.

• Government bonds can be funded domestically, meaning repayment flows back to New Zealanders.

• Future retirees will be more financially independent, reducing pressure on New Zealand Superannuation.

• As the government contemplates raising minimum contributions from 3% to 4%, or even 5%, the intent appears to be accelerating the growth of KiwiSaver—potentially aiming to scale the fund into the trillions in the long term.

10. Final Word

• Ultimately, the decision of where to invest your KiwiSaver rests with you. Whether you choose to sit on the left, lean to the right, or remain on the fence, your fund choice should align with your personal circumstances, retirement goals, and risk appetite.

• If you require personalised advice or assistance in reviewing your KiwiSaver setup, feel free to contact our team. We are here to help you make informed, strategic financial decisions.