You might have heard the recent chatter in the media about potential changes to KiwiSaver. With proposals floating around—most notably from NZ First—suggesting that KiwiSaver could become compulsory, it’s a topic that has every Kiwi ear pricked up.
Currently, KiwiSaver is voluntary. You can opt out if you start a new job, and you can take a “savings suspension” if money gets tight. But the new conversation is about whether we should follow Australia’s lead and make saving for retirement mandatory for every worker.
At Property Apprentice, we believe in looking at the numbers without the hype. Let’s break down what a compulsory scheme could mean for your wallet, your property goals, and your golden years.
The Case For Compulsion (The Pros)
Supporters of a compulsory scheme argue that we simply aren’t saving enough.
- Closing the Savings Gap: Research suggests a significant portion of New Zealanders are heading towards a retirement where NZ Super alone won’t be enough to live comfortably. Compulsory contributions would ensure everyone builds a nest egg.
- Free Money: If you aren’t in KiwiSaver, you are missing out on the 3% employer contribution (and the Government tax credits). Compulsion ensures every employee gets this “pay rise” into their future fund.
- National Economic Strength: A larger pool of domestic savings (currently over $100 billion) can invest back into New Zealand businesses and infrastructure, potentially strengthening the economy we all rely on.
The Case Against (The Cons)
However, making it mandatory isn’t a silver bullet, and there are valid concerns.
- Reduced Take-Home Pay: In a cost-of-living crisis, losing 3-4% (or more, if rates rise) of your weekly pay can be painful. For low-income earners, that cash might be needed for groceries now, not retirement later.
- Business Costs: Employers would face higher wage bills if they are forced to contribute for every single staff member without exception. This could flow through to higher prices for goods and services.
- Lack of Flexibility: One of the current benefits of KiwiSaver is the ability to pause contributions during financial hardship. A strictly compulsory system might remove this safety valve, locking money away when people feel they need it most.
The Hidden Benefit for Aspiring Property Investors
You might be wondering, “I want to invest in property, so why should I care about my KiwiSaver balance?”
The reality is that for most Kiwis, KiwiSaver is the gateway to the property ladder.
Buying your first home is often the first step toward building a property portfolio. Your KiwiSaver balance (including the returns and employer contributions) can be withdrawn to form a good chunk of your first home deposit.
If KiwiSaver were compulsory:
- Bigger Deposits: First home buyers would likely reach the market with larger deposits, having been “forced” to save methodically from day one.
- Better Lending Terms: A larger deposit means a lower Loan-to-Value Ratio (LVR), which often unlocks better interest rates and potential cashback offers from the banks.
- Momentum: The discipline of regular KiwiSaver contributions trains you to live on slightly less than you earn—a crucial habit for any successful property investor managing mortgage top-ups.
A Note from Debbie Roberts
We asked Debbie Roberts, our resident Financial Adviser and Co-Founder, for her take on the situation.
Whether KiwiSaver becomes compulsory or not, the principles of financial success remain the same. You cannot rely solely on the Government—whether that’s NZ Super or a compulsory savings scheme—to secure your financial freedom.
While KiwiSaver is a fantastic tool for diversification and that crucial first deposit, it should be just one part of a wider plan. If you are waiting for legislation to force you to save, you are already on the back foot. The most successful investors we work with take control of their cash flow voluntarily, well before any government tells them they have to.”
What Should You Do?
Whether the rules change or not, your focus should remain on your own long-term strategy. If you are already a member, check your contribution rate and your fund type. Are they aligned with your timeline for buying a home or retiring?
If you are looking to buy your first home or expand into investment properties, understanding how to leverage your existing assets (including KiwiSaver) is key.
Don’t wait for the rules to change to sort out your future.
Book a free, no-obligation chat with Paul Roberts today. We can help you look at your current position and see how you can move forward, regardless of what the politicians decide.
Book your free chat with Paul here
Disclaimer: This article is for informational purposes only and does not constitute personalised financial advice. Please consult with a qualified financial adviser before making any investment decisions.