That’s the real shift now underway. The question is no longer whether the system works – it does. The question is whether it works well enough.
The gap most people don’t see
Research from Massey University continues to highlight an important reality: there is a meaningful gap between what NZ Super provides and what many retirees actually spend.
For a basic “no frills” lifestyle, NZ Super gets reasonably close – particularly for couples. But for a more comfortable retirement, which includes discretionary spending like travel, eating out and hobbies, the gap becomes much more significant. For many households, that gap can equate to hundreds of dollars per week.
Put another way, achieving that more comfortable lifestyle often requires something in the order of $600,000 to $700,000 in savings (if not more) on top of NZ Super.
That’s a number many people don’t intuitively appreciate.
Straightforward – but not perfect
One of the strengths of NZ Super is that it’s not complicated. It’s universal, it starts at 65 and people understand it. This all creates trust – and that trust is incredibly valuable in a retirement system.
But this also comes with trade-offs.
NZ Super is not targeted, which makes it relatively expensive as the population ages. And it applies a single eligibility age across a very diverse population.
Not everyone experiences retirement the same way. A blue-collar worker in a physically demanding job may not be able to work as long – or live as long – as someone in a professional role. Yet both enter the system at the same age.
That raises fair questions. Should retirement settings better reflect differences in life expectancy or occupation? Possibly – but doing so would introduce complexity into a system that has historically worked because of its ease.
That doesn’t mean the system is broken. But it does highlight that it isn’t perfect, and those trade-offs are part of the broader conversation.
A system worth celebrating
As KiwiSaver approaches its 20-year anniversary, it’s worth stepping back and recognising how much progress has been made.
Since its introduction in 2007, KiwiSaver has transformed the way New Zealanders save and invest. Millions now have exposure to diversified portfolios – often without needing to actively manage them – and investing has become part of everyday financial life.
At a national level, KiwiSaver has helped build a substantial pool of domestic capital, supporting businesses and infrastructure and reducing reliance on foreign funding.
Perhaps most importantly, it has normalised saving for retirement.
The system is not perfect. But it is a significant achievement and one worth acknowledging.
At the same time, the next phase will require evolution – and not just in policy settings, but in understanding.
With an election approaching, there has been renewed discussion around potential KiwiSaver reforms. That’s healthy – provided the focus remains on long-term outcomes rather than short-term politics.
There are a number of areas worth considering.
One is earlier engagement. As some others have already suggested, enrolling children into KiwiSaver at birth, even with small initial balances, could help embed a lifelong savings mindset and significantly improve long-term outcomes through compounding.
Variations of this approach have been tried internationally. In the UK, for example, the Child Trust Fund provided every child with a government-funded investment account at birth. While balances started small, the scheme helped normalise investing from an early age and demonstrated how even modest contributions can grow meaningfully over time.
Another is contribution rates. Gradually lifting minimum contributions over time would likely have a far greater impact on retirement adequacy than trying to optimise investment decisions later. Over time, that could naturally evolve towards a greater degree of compulsion.
There are also structural gaps to address. The gender KiwiSaver gap remains significant, reflecting differences in income, career breaks and participation. Given KiwiSaver is effectively part of household wealth – and often treated as matrimonial property – improving outcomes here is not just a financial issue, but a societal one.
Education
But alongside all of this sits a more fundamental issue: education.
KiwiSaver has been incredibly successful at driving participation. It has been less successful at driving understanding.
One of the biggest gaps we see is not access to KiwiSaver, but understanding. Many members are doing the right thing by contributing, but are unsure how much they need, what fund they should be in or what their balance might translate to in retirement. Bridging that gap doesn’t require complexity – it requires clearer, more practical guidance that helps people connect today’s decisions with tomorrow’s outcomes.
Too many New Zealanders still see KiwiSaver as a deduction from their pay, rather than an investment decision. Concepts like contribution rates, fund choice, risk and expected retirement income remain unclear for a large portion of members.
The solution is not complexity. People don’t need to become experts. But they do need to understand a few key things: how much they are contributing, what their fund is designed to do, and what that might translate to in retirement.
Other gaps to close
Another gap to close is that between participation and engagement.
Nearly a third of working-age KiwiSaver members are not currently contributing – highlighting the gap between participation and meaningful engagement. Many others remain in default settings that may not reflect their long-term goals.
Others focus heavily on short-term market movements, rather than the decades-long horizon that retirement saving requires.
The reality is that outcomes are often driven less by trying to be clever with investments and more by simple things: how much you contribute, how early you start and whether you stay invested.
This is also where advice can play an important role. Having someone to guide decisions – particularly through periods of market volatility – can make a meaningful difference to long-term outcomes.
On this note, the vast majority of Generate’s members have come through financial advisers, reflecting the value many New Zealanders place on support, reassurance and staying focused on long-term goals rather than short-term noise.
The next challenge
If the past 18 years have been largely about helping New Zealanders build retirement savings, the next phase will also be about helping them use those savings effectively.
This is where the conversation becomes more complex – and more human.
Retirees face a number of competing risks. There is the fear of running out of money, particularly as people live longer. But there is also the opposite risk: being too conservative and underspending – and not enjoying the retirement they worked hard to fund.
There are market risks too. Retiring into a downturn and drawing down too much too early – known as sequence risk – can have a lasting impact on outcomes.
In that context, retirement is no longer just an accumulation problem. It is a decumulation problem – and a confidence problem.
What matters from here
If there is a single takeaway, it is this: the biggest determinant of retirement outcomes is not complexity – it is behaviour.
Better defaults, higher contribution rates and better education will do more for most New Zealanders than trying to optimise every investment decision.
Because ultimately, retirement is not about building the largest possible balance. It’s about turning a lifetime of savings into a stable, sustainable and confident standard of living.
And as we approach two decades of KiwiSaver, that’s something worth both improving – and appreciating.
Generate is a New Zealand-owned KiwiSaver and Managed Fund provider managing over $9 billion on behalf of more than 190,000 New Zealanders.
This article is intended for general information only and should not be considered financial advice. The views expressed are those of the author. All investments carry risk, and past performance is not indicative of future results.
To see Generate’s Financial Advice Provider Disclosure Statement or Product Disclosure Statement, go to www.generatewealth.co.nz/advertising-disclosures/. The issuer is Generate Investment Management Limited.