A savings machine that skips the people building the economy
KiwiSaver works brilliantly for employees, and that is precisely the problem. It runs on three things none of the self-employed get: automatic enrolment, payroll deduction, and an employer contribution. Take those away and the whole system stops humming.
The numbers are blunt. Just 44% of self-employed Kiwis actively contribute to KiwiSaver, against 78% of employees, a 34-percentage-point gap measured across the year to March 2025 in a joint report from the Te Ara Ahunga Ora Retirement Commission and Hnry. Katie Wesney, a financial adviser and national coaching lead at Enable Me, put it cleanly in Stuff: “Employees inherit a retirement savings system. Self-employed people have to build one of their own.”
This is not a small cohort. The 2023 Census counted more than 420,000 self-employed New Zealanders, spanning tradies, healthcare workers, consultants, freelancers, and gig workers. Yet they make up only 8% of KiwiSaver membership.
The government’s own money follows the payroll
The incentive money flows almost entirely to employees. The Retirement Commission’s distributional analysis covering the three tax years to March 2024 found 89% of total government contribution value went to employees and just 7% to the self-employed. Self-employed members receive 30% lower average and 50% lower median government contributions than employees, and 41% of them get no government contribution at all, against 19% of employees.
Worse, the incentive rewards the people who need it least. Hnry chief executive James Fuller noted in 2025 that “the low income self-employed earners are the ones who are missing out the most,” with those earning around $110,000 collecting the full top-up while lower earners fall away. The nudge is backwards.
Budget 2025 lit the fuse
From 1 July 2025, the government halved the member tax credit, the main incentive available to the self-employed. The maximum annual top-up dropped from $521.43 to $260.72, meaning members now need to contribute $1,042.86 to collect the full amount.
The reaction was immediate. Hnry’s Sole Trader Pulse survey found 24% of sole traders would reduce contributions and a further 6% would stop entirely because of the change. In July 2025, Fuller warned the cut had “effectively created a generation of sole traders who will become reliant on state funding at retirement.” Dr Patrick Nolan of the Retirement Commission called it “the final nail in the coffin” after two years of declining participation.
Compulsion without a matching hand
The fix on the table is to make contributions compulsory for the self-employed at 4% from July 2028, against the combined 12% employees and employers pay together. A June 2026 report fairly described this as “all stick and no carrot”: forcing people to save while cutting the reward for doing so.
The Retirement Commission’s smarter alternatives include automatic enrolment through tax and accounting platforms like Hnry or Xero, flexible percentage-of-income contributions, and linked emergency-and-retirement accounts that solve the liquidity problem that makes locking money away unattractive on an irregular income.
Why this is the taxpayer’s problem too
Here is the argument that should land hardest with a pro-business audience. Under-saved retirees do not vanish, they become a fiscal liability. As Fuller put it in 2025, “today’s inaction could become tomorrow’s fiscal burden” as more retirees lean on NZ Super and benefits. Cutting an already inadequate incentive, then floating compulsion without support, fails on its own fiscal logic.
Do not treat the business as the plan
Many owners quietly assume the business is their nest egg. Wesney calls that “the riskiest plan” because it rests on a single illiquid asset, valued by someone else, sold at a time you do not fully control. Businesses do not always fetch what the owner thinks, and some do not sell at all.
The structural gap is not the self-employed’s fault. But waiting for policy reform is not a retirement strategy. The practical move now is to contribute the $1,042.86 to capture the top-up if eligible, build liquid savings alongside it, and be brutally honest about what the business would actually clear on the open market. The machine will not build itself.
Sources
- Hundreds of thousands of Kiwis are still being left out of the KiwiSaver success story (2026-07-21)
- New report highlights growing retirement savings gap between self-employed and employees (2025-08-26)
- Sole traders face a very real risk of poverty in retirement (2025-08-26)
- Govt KiwiSaver cut ‘final nail in the coffin’ for self-employed (2025-07-28)
- KiwiSaver Government Contribution Distributional Analysis 2025 (2025-05)
- KiwiSaver mandate ‘all stick and no carrot’ for self-employed (2026-06-25)