Tax cuts offer a chance to boost KiwiSaver balances.

New Zealanders are not saving enough for retirement – but the recent tax cuts may go some way to changing that, says Milford financial adviser Liam Robertson.

Robertson says the cuts, which came into effect on August 1, provide an opportunity for Kiwis to increase their KiwiSaver contributions: “Many New Zealanders have their heads in the sand about retirement and are kind of sleepwalking towards that stage of their life. The average KiwiSaver balance, for example, is only $32,000 which is not enough to retire on. It’s a scary situation for a lot of people.”

Robertson says for someone on an income of $60,000, the tax cuts will put an extra $50 per fortnight into their pockets and he believes people should consider using some of this money to increase their KiwiSaver contributions.

“For example, boosting your contribution from three per cent to four per cent would cost $23,” he says. “For a person aged 30 earning $60,000, this could result in an estimated additional $80,000 in their KiwiSaver by age 65.” **

Robertson says the good news is, while saving more for a first home or retirement, people could still end up with more money in their pocket (the $27 per fortnight left out of the $50).

“However, we know the cost-of living is tough and things are tight out there at the moment, so people may want to keep the extra money,” he says. “Increasing KiwiSaver contribution is not mandatory but is an option we are suggesting people might want to consider.”

Robertson says the idea has been raised because Milford wants to encourage New Zealanders to think about their future, how they are tracking towards retirement and their current KiwiSaver contribution.

“We realise it can be confronting to work out what you will need when you finish working and even though needs and lifestyles are different, we encourage everyone to run their own numbers.

“We always recommend people consider increasing their KiwiSaver contribution whenever they get a pay rise and these tax cuts are a bit like a pay rise,” he says. “However, some people may feel they are doing okay and don’t need to put extra into the fund. That’s good too.”

Compared to the rest of the developed world, Robertson says Kiwis don’t save enough. In Australia, for example, the Super Guarantee system requires employers to pay superannuation contributions of 11.5 per cent of an employee’s ordinary time earnings – an amount which is to increase to 12 per cent in July 2025.

This is well above the average New Zealand KiwiSaver contribution of 3.7 per cent (according to the government-funded agency Sorted).

Robertson says the 2023 Massey University Retirement Expenditure Guidelines shows how important it is to save for retirement. Based on last year’s figures, the report revealed a significant shortfall between national superannuation and average household expenditure.

After tax, a two-person household receives $763.64 per week in super. But even a no-frills weekly budget for those living in a metropolitan area will set them back $982.02 per week. In a provincial region, the report says weekly no-frills expenditure is likely to come out at $849.82.

Robertson says it is easy to change KiwiSaver contributions. It can be done through an employer, in myIR or by contacting your KiwiSaver provider. You’ll need your IRD number and the rate you want – three, four, six, eight or ten per cent.

If doing it through an employer, either written notification by email or letter is required or it can be done by giving the employer a completed KiwiSaver deduction form. In myIR instructions are given after logging in.

For more information about changing your KiwiSaver contribution go here. For more investment insights, check out Milford’s The Investing Place for exclusive masterclass content, news and opinion pieces. To learn more about the award-winning Milford KiwiSaver Plan, visit milfordasset.com

**Assumptions made, using the Milford KiwiSaver calculator:

• Fund: Growth Fund (4.5 per cent p.a.)
• Income: $60,000 p.a.
• Age: 30
• Retirement age: 65
• Assumed rate of inflation: 2 per cent p.a.
• Wages/salary will increase each year by 3.5 per cent.
• This calculator assumes your government contributions entitlement will continue until retirement age of 65, up to a maximum of $521.43 per annum.
• Employee, employer, voluntary and government contributions stop at the retirement age, 65.
• No withdrawals before retirement age.

This article does not take into account your investment needs or personal circumstances. It is not intended to be viewed as investment, tax or financial advice. Past performance is not a reliable indicator of future performance. Investment involves risks and returns can be negative as well as positive. Milford Funds Limited is the issuer of the Milford KiwiSaver Plan and Milford Investment Funds. Please read the relevant Milford Product Disclosure Statement at milfordasset.com. Before investing you may wish to seek financial advice. The Disclosure Statements for all Milford Financial Advisers contain more information and are available on request, free of charge. See our Financial Advice Provider Disclosure Statement at milfordasset.com/getting-advice.