The need is there, seeing as two-thirds of people surveyed in 2021 said they didn’t have savings, and 81% said they couldn’t fund unexpected expenses equivalent to a month’s income.

But does KiwiSaver cut the mustard? According to a report released by the Retirement Commission this month, which combined IRD, FMA and Te Ara Ahunga Ora data and research, the scheme is close but no cigar.

KiwiSaver members represent 80% of the total population in paid employment. In contrast, the majority of non-contributors are on low or no income, and one-third of KiwiSaver members have incomes of less than $20,000.

In other words, the scheme falls flat when accounting for those outside (or disadvantaged by) the traditional workforce.

Equity issues

Whether women are working in a female-dominated industry or getting paid less than men for the same job, we know women – particularly non-Pākehā – pay a literal price in the workforce. It’s no surprise this extends to KiwiSaver contributions.

The Retirement Commission’s report revealed women and men on average contribute the same percentage of their salaries to KiwiSaver – yet the yearly average amount contributed to a man’s KiwiSaver account is 36% higher than the female equivalent.

The report also highlighted that when factors such as industry and earnings are controlled, women’s contribution rates tend to be higher. It means women contribute more to the scheme but the workforce is failing them.

To add insult to injury, employer contributions are optional for employees on parental leave, so women – let’s be frank, we’re not there yet – are further disadvantaged if a parent chooses to suspend their contributions.

The same could be said for sole traders, those not in paid work, children, or people receiving ACC, a benefit or paid parental leave (which aren’t subject to compulsory deductions).

Ageism

For those working, questions arise as to why compulsory employer contributions start for employees aged 18 and end at 65. Sure, employer superannuation contribution tax is deducted from employer contributions to employees’ KiwiSaver, so there’s a case to consider whether employers should take the hit.

But, surely employees shouldn’t be penalised – or discriminated against – on the basis of age?

The situation is worse for those under 18 who don’t get to enjoy the benefits of a gold card membership. Although the KiwiSaver scheme has no age restriction per se, children under 16 require the consent of all guardians.

Unless you’re on good terms with your ex, your child won’t be automatically enrolled until they’re 18. In 2021, a petition challenged the antiquated “nuclear family unit” paradigm and a parliamentary Petitions Committee called on the Government to amend the act accordingly. To date, the system remains unchanged.

The devil is in the details

Even workers within the specified age bracket can get slammed, with more than half of New Zealand employers taking a “total remuneration approach”, the report read.

For context, this is where employers pass on their compulsory contributions to the employee through a contract.

For example, say you’re offered a job with an annual salary of $100,000. Your contract may include a clause that “includes” employer contributions. Combined with your 3% contribution, you’ve inadvertently paid for your retirement twice, leaving you with a salary of $94,000 before tax.

Sneaky? Yes, seeing as the KiwiSaver Act clearly states compulsory contributions must be paid on top of gross salary or wages unless the parties agree otherwise. The legislation goes further to explain a duty of good faith applies when parties to an employment relationship bargain for terms and conditions relating to compulsory contributions.

While the introduction of the Employment Relations (Protection for KiwiSaver Members) Amendment Bill last year aimed to resolve this issue, the outcome is not looking good. In 2007, Labour prohibited total remuneration clauses, which were introduced again in 2008 under National.

For the record, unlike other jurisdictions, employees tend to contribute more to the scheme than employers and the Government combined. One in three employees contributes more than the minimum 3% rate, and fewer than one in 10 employers pay above the compulsory 3% rate.

Rather than waxing lyrical about the importance of valuing people over profit, Treasury said it best in its guidance to employers back in 2007.

“Employees and employers alike have a stake in lifting the saving performance of New Zealand. Increased savings helps employees enjoy a higher standard of living in retirement and also increases the supply of domestic savings that can be invested in New Zealand businesses, helping local businesses grow.”