It’s also not surprising that if you are forced to choose between paying your mortgage or rent, your power bills or making sure your kids have shoes for school, you are going to put saving on the back burner.
But the path towards financial security is a relatively simple one.
Sadly, it appears to be one that increasing numbers of New Zealanders are unable to follow.
The number of people contributing to KiwiSaver fell for the first time in the year to March 2025, according to the Financial Markets Authority’s (FMA) annual KiwiSaver report.
Just over two million people contributed to KiwiSaver during the past year: 1.3% fewer than in 2023/24.
Meanwhile, 30% of KiwiSaver members aged between 18 and 65 didn’t contribute towards the scheme during the year – up from about 20% in 2010.
Members withdrew $444 million from their retirement savings for hardship purposes during the year, 68% more than in 2023/24.
None of these facts bodes well for New Zealand’s long-term financial health.
It is certainly the case that the tough economic conditions in the past two years are putting the squeeze on many people.
An optimistic take might be that economic conditions will improve in the next year and with them the rates of contribution to KiwiSaver.
I am reasonably optimistic about the first part of that scenario. But there is a risk that the damage being done to our already fragile savings culture will be lasting.
We need to create conditions that make it almost impossible for Kiwis not to save.
I was hopeful KiwiSaver would do the job but, in its current form at least, it is struggling.
In light of this depressing news about KiwiSaver, the policy proposal put forward by Winston Peters and New Zealand First last weekend seems well-timed.
Peters has proposed making KiwiSaver compulsory, with increased contribution rates for employees and employers.
He has suggested raising contributions to 8% initially, then 10%, with tax cuts to offset the costs.
That immediately prompted pushback from critics who suggested the tax cuts could cost the Government as much as $28.3 billion a year.
Peters, to be fair disputed those calculations, but regardless, NZ First’s policy might be too “gold-plated” for our cash-strapped Government to manage right now.
That’s a shame, and I get the irony that this attitude is comparable to those struggling households putting their saving on the back burner.
In the long run we’d be better off.
But what is heartening about Peters’ call is that it pushes the debate along in the right direction for New Zealand.
The two most prominent reactions I’ve seen to the proposal have come from Simplicity chief economist Shamubeel Eaqub and Finance Minister Nicola Willis.
Eaqub also pointed out the big hole the proposed tax break would create in Crown accounts in the short term.
But he was in favour of a graduated approach to boosting contribution requirements, without tax cuts.
He suggested we could get there over a 10-year time frame.
Willis made similar points and also pointed out that when we look at Australia, we should remember the pension is means-tested.
She questioned the viability of maintaining a universal state superannuation scheme and subsidising a compulsory KiwiSaver scheme.
One further barrier to Peters’ plan is political.
Compulsory superannuation is unlikely to fly in any coalition that relies on Act for support.
David Seymour and his party are ideologically opposed to the idea of the state telling people what to do with their money.
Seymour argues that individual actors are best placed to make economic decisions that suit their circumstances.
I’ve never been convinced of that, partly because I know I’m far from a perfectly rational economic unit myself.
But also, perhaps unlike Seymour, I believe that there are structural reasons for poverty that run deeper than our capacity for personal choice.
I also look across the Tasman and see what compulsory superannuation has done for them.
Australians collectively have $4.5 trillion saved in their retirement funds.
That’s an average of $225,000 for every adult Australian.
The KiwiSaver scheme currently has an average of $37,000.
We are a long way behind.
Beyond the personal benefits of the higher savings levels is the pool of capital it creates to invest in Australian business.
It’s a point that won’t be lost on NZ First that we’d be able to retain local ownership of more assets if our capital markets were deeper.
We might have, for example, been able to keep Fonterra’s consumer business largely New Zealand-owned.
If we had that kind of retirement savings pool we might also be able to cope with means testing the state pension to take pressure off the Government’s finances.
That seems to be the political poison here, even raising the super age to 67 seems more plausible as a policy option for the main parties.
But why not bring in means testing progressively? We could set the bar high for the first 10 years or so.
Why does a 65-year-old who is still working as an executive and earning more than $200,000 a year need a state payout?
Or someone with more than $10 million in assets?
I think Equab is on to something with a graduated long-term shift to something more like the Australian model.
Ideally we’d see the two major parties reach some kind of bipartisan agreement on this.
New Zealanders are painfully reluctant to accept structural economic change because they extrapolate to the end point, apply that to their current circumstances and catastrophise.
The same could be said of efforts to introduce capital gains taxes.
We need to think more strategically about how the economy needs to look in 10 or 20 years and start taking the important first steps.
Those first steps needn’t be radical in themselves. But they need to get us moving in the right direction.
So I’m heartened to see Peters pushing for it and Willis discussing the possibility of taking further steps.
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.
Sign up to Herald Premium Editor’s Picks, delivered straight to your inbox every Friday. Editor-in-Chief Murray Kirkness picks the week’s best features, interviews and investigations. Sign up for Herald Premium here.
