The Future of KiwiSaver: A Q&A with Dean Anderson

As New Zealand heads toward the next election, retirement policy is set to become a major battleground for policy reform. We sat down with Dean Anderson to discuss why the current system needs more than just minor adjustments and how we can better prepare the next generation for financial success.

To be honest, we haven't seen much substance yet. The only real policy proposals to date have been on increasing contribution rates. While we all know that is necessary, there hasn't been much context beyond that. I suspect the major parties are holding their cards close to their chest and will reveal their broader Superannuation and KiwiSaver policies much closer to the election.

Historically, politicians have focused on "tinkering" - with ideas like using KiwiSaver for rental bonds or moving away from the efficient centralised IRD processing model. Looking ahead, the big debate will be about compulsion.

I’m actually not a fan of making KiwiSaver compulsory right now. New Zealand is a nation of small business owners and people facing intense cost-of-living pressures. If you are living pay day to pay day, your priority should be paying down high-interest debt, not being forced to lock money away until you're 65. However, we have to be careful; if only middle-class Kiwis contribute, the inequality gap will explode. We need better incentives, not just mandates.

It’s a major problem. Over the past decade since the $1,000 "kickstart" for kids was removed, the number of members under 18 has halved. We are creating a generation of disengaged savers.

I’d like to see a policy where we redirect the annual government contribution. Currently, the government spends about half a billion dollars on tax credits that mostly go to middle-income earners who would probably save anyway. Why not take that money and put $250 a year into the account of every child until they are 18? It would be cheaper for the government than the old subsidy, and it would give every 18-year-old a "nest egg" of nearly $10,000. When a teenager sees real money in their own name, financial literacy becomes tangible rather than just a theoretical concept. Good luck trying to encourage an 18 year old to save for retirement otherwise.

Currently, the age for both is tied at 65. I believe they need to be decoupled. Most of us accept that as we live longer and stay healthier, the Superannuation age will likely need to rise to 67.

However, the "buy-in" for that change should be lowering the KiwiSaver access age to 60. There are people in hard manual labour jobs who simply cannot work until 67. We also need to acknowledge the differing life expectancies across differing demographic groups. If we lower the KiwiSaver access age, those people can use their own savings to transition into retirement or lighter work, while knowing that the state Superannuation will kick in a few years later.

It’s a tough space because business owners often put every cent back into their company. They take "one big bet" that their business or farm will be their retirement fund. But what if the market changes or the business fails?

KiwiSaver is the perfect tool for them because it’s diversified and easy to manage. Even if it’s just incremental amounts, building a nest egg outside of their core business provides essential optionality. We need tax incentives that encourage this cohort to diversify their wealth rather than having everything in one basket.

My call to all Kiwis is to look past the short-term "fixes." We’ve seen in the past how New Zealand has missed opportunities by making retirement decisions based on immediate political gains rather than long-term consequences. These settings are vital for our national savings and our children’s financial security. We need to scrutinise every policy through the lens of what it means for the next generation, not just ourselves.