How To Stop People Falling Through The Retirement Gap

New Zealand’s Retirement Commissioner has called for sweeping changes to KiwiSaver, releasing recommendations that would change the way SMEs manage people and payroll.

In a three-yearly review of the retirement income program, Commissioner Jane Wrightson said, in its current state, KiwiSaver risked leaving people behind. She said society had changed since the scheme was introduced two decades ago due to the aging population, shifting work and caregiving patterns and declining home ownership.

Here are the recommendations New Zealand business owners need to watch.

The review revealed a troubling savings gap for self-employed people and contractors. Only 44% currently contribute to KiwiSaver, compared to 78% of employees, and the amount is less than half: an average of 2.6% of income while wage earners contribute a total of 6.6%. 

The Commissioner said this disparity left many sole traders and contractors with substantially smaller nest eggs than their employed counterparts. She recommended raising government contributions for low-income earners and potentially phasing out assistance for people on higher incomes.

Removing Barriers For Excluded Workers

SMEs could find themselves paying out more in KiwiSaver contributions under a proposal aimed at the changing workforce. The Commissioner said contributions should be mandated for workers over 65, reversing the current policy that makes payments voluntary for this age group.

For small businesses, it would make employing older workers more expensive. But the review argued the change would support financial independence for older workers and reduce their sole reliance on NZ Superannuation.

The review also recommended contributions for people on temporary visas, who currently can’t access KiwiSaver despite paying taxes. “These changes would better reflect the diversity of New Zealand’s workforce and align KiwiSaver with international best practice,” Commissioner Wrightson said.  

Calls For An End To Packaged Deals

Total remuneration packages, where employer KiwiSaver contributions are bundled into salary instead of delivered on top, would be axed under the Commissioner’s plan. The review found 25% currently apply it to all employees and another 20% use it for specific roles.

The review criticised the arrangements as “undermining the intent of the scheme” because employees effectively paid their own employer contribution. For SMEs, a future ban would mean reviewing employment agreements and shifting toward clearer, more transparent wage practices. 

It Would Pay To Take Red Tape Out Of Admin

The review called out a series of pain points in payroll administration, particularly around parental leave, hardship withdrawals and the consistency of employer contributions. It warned against relying on manual processes and recommended updating payroll systems.

“Most small business owners didn’t start their business to spend time buried in spreadsheets and second-guessing payroll,” says Employment Hero’s New Zealand Sales Manager Neil Webster. “As rules around KiwiSaver keep changing, digital payroll takes that stress off their plate, keeping settings up to date automatically and getting it right every time. That gives employers their time back to do what they love most: growing the business, looking after their people and driving results.”

Commissioner Wrightson called for bipartisan action to reform KiwiSaver for the sake of workers and businesses. “The message is clear. We need a long-term political accord to focus on providing certainty for future generations of retirees.”