kiwisaver, contribution

How to save more in your KiwiSaver account in 'Small Steps'

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All of us want to have a financially secure retirement. Because of rising expenses and inflation. NZ superannuation is not going to be enough to fulfil all our retirement expenses. In such a scenario KiwiSaver plays a very important role in our lives.

However, a quick search for KiwiSaver will bring up a lot of articles which state that the default contribution rate which is currently at 3% is just not enough for Kiwis to save enough to be financially secure at retirement.

Combining the minimum contribution rates an employee (3%) and the employer (3%), minus the tax paid on your employer’s contribution, Kiwis are saving 5-6% of their gross salary each year. To put this into context, a person earning $50,000 a year contributes just around $3000 a year to their Kiwisaver account.

In order to bring about a positive change to this situation, last year, National Capital along with three other financial advice businesses worked with researchers from Massey University to put forward a proposal which we felt will allow Kiwis to start saving more. This proposal was based on the very successful Save More Tomorrow Program which by some estimates has added $29.6 Billion to US retirement accounts.

Our proposal recommended that KiwiSaver members be given an opportunity to keep increasing their contributions each year by a small amount of their choosing. The contributions would then keep increasing till a maximum limit set by the KiwiSaver member. All this would take was a small addition to the current KiwiSaver KS2 form which would allow employees to indicate how much they want their contributions increasing each year and the maximum limit cap. We believe the proposal if implemented would help ensure an entire generation of Kiwis save enough in KiwiSaver to have a secure retirement.

The proposal was very well received and the CFFC (Commission for Financial Capability) recently published a recommendation to the NZ government based on it. In its 2019 review of retirement policies, the CFFC recommended the introduction of a ‘Small Steps’ employee contribution programme as a default to every new KiwiSaver member and an option to the existing members. This programme would automatically default to increase the savings contribution by 0.5% every year till they reach 10% or opt-out of the programme. ‘Small Steps’ would, therefore, promote significant contribution increases, but without causing financial discomfort for savers as the steps each year would be small.

National Capital is very proud yet humbled to be part of taking this initiative to reality. We see being part of such initiatives a step in achieving our mission of helping a million kiwis become financially secure.



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