Some of these people would have been unemployed – there were 163,000 unemployed people in the March quarter. Others would have chosen not to contribute, perhaps because they couldn’t afford to, or because they simply didn’t want to.
The FMA’s data doesn’t reveal why people weren’t contributing to KiwiSaver, however it shows the vast majority stopped contributing for longer than just a few months.
It also shows that those who weren’t contributing had an average of only $24,000 in their KiwiSaver accounts, which was less than the $40,000 that the average member had.
The FMA’s data doesn’t detail whether those who weren’t contributing had other retirement savings.
Either way, the figures show that any moves to make it compulsory for working people to contribute to KiwiSaver would be impactful.
There is a growing acknowledgement that many New Zealanders need to do more to save for their retirements. This is particularly the case as the ageing population is seeing the cost of NZ Super rise rapidly, calling into question whether the state will be able to afford to support retirees as much as it currently does in the future.
The portion of 18 to 64-year-olds in KiwiSaver, but not contributing, rose from about 20% in 2010 to over 30% today. The percentage is fractionally higher than it was last year, when the FMA identified the issue as a concern.
Hardship and first-home withdrawals rise
Similarly worrying, was the rapid rise in the number of working-age people getting permission to tap into their KiwiSaver accounts due to financial hardship.
Around 51,600 withdrawals, totalling $531m, were made due to hardship in the year to March.
The number of withdrawals was up 17% from the previous year, which had experienced a big 51% jump from the year before that.
The rise in hardship withdrawals can likely be explained by the rising cost of living relative to incomes, as well as the unemployment rate reaching an 11-year high.
While the sluggish housing market has contributed to New Zealand’s soft economic performance, it has made it more affordable for people to buy their first homes.
A record 50,000-plus people withdrew a total of $2.2 billion from their KiwiSaver accounts in the year to March to support the purchase of their homes.
Taking a step back, $6.4b more was put into KiwiSaver over the past year than was withdrawn.
This figure hasn’t changed much since 2023, however the size of the scheme has. So net inflows, as a percentage of the scheme, have been declining.
As at March 31, there was $139b invested via KiwiSaver – 13% more than the prior year, in part due to more money being invested, and in part due to investments delivering returns.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the Parliamentary Press Gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
Stay ahead with the latest market moves, corporate updates, and economic insights by subscribing to our Business newsletter – your essential weekly round-up of all the business news you need.