Compulsory KiwiSaver will be settled in your next pay round

Five parties are campaigning on KiwiSaver this election, and the debate is being framed almost entirely as a question about retirement. For anyone running a payroll, it is a question about next year’s wage bill first.

National, Labour and NZ First all want higher compulsory employer contributions. Act is the only one that wants to leave the rate alone. Whoever wins, the evidence from the last increase is clear: compulsory saving is not free money. It comes out of the pay packet, the margin, or both.

Three parties agree on direction, not on the bill

According to Brian Fallow’s breakdown of the five policies, National would make employer and employee contributions compulsory starting in about 18 months, lifting the default from 3.5% to 6% by 2032. Employer contributions would keep rising even if a worker paused theirs. Labour would compel employers only, on the same 6% path. Both would remove the rule letting employers stop contributing for over-65s, a quiet extra cost for firms that retain older staff.

NZ First goes further, with 8% rising to 10% “eventually” and no timetable, but pairs it with a cut in company tax from 28% to 20% for firms turning over less than $30 million. Act opposes compulsion and would instead stop taxing fund earnings, which topped $10 billion last year, at a cost of about $1 billion a year.

Only NZ First has explicitly acknowledged that higher contributions are a cost to business and offered something in return. That should tell employers how the other two expect the bill to be paid.

Half a point was already paid for in wages

The default rose from 3% to 3.5% on 1 April 2026, with a further step to 4% already legislated for 1 April 2028. In February 2026, Treasury expected 80% of the employer cost of that rise to be met through lower-than-otherwise pay rises, and BusinessNZ advocacy director Catherine Beard said employers would treat KiwiSaver as one more line in total employment cost, alongside ACC levies, FBT and training.

That was for half a percentage point. National and Labour are proposing 2.5 points on top of the current employer rate, five times the increase Treasury already expected to be absorbed mostly by wage restraint. One KiwiSaver provider executive put the combined jump from 7% to 12% bluntly: an extra 5 percentage points of salary that has to come from somewhere.

The fiscal logic is not hard to follow. In 2025, Cabinet halved the government’s matching contribution, cutting the annual cap from $521.43 to $260.72, explicitly citing NZ Super costs rising from $21.6 billion toward $29 billion by 2028/29. Governments of both stripes want private saving to carry more of the retirement load. Compulsory employer contributions are how that load gets shifted onto payrolls without appearing in a Budget.

Small firms take the squeeze, contractors get nothing

Business reaction to National’s plan split along firm size. Simplicity’s Shamubeel Eaqub called the impact very minor because most workers already contribute, while BusinessNZ economist John Pask warned “there’s no such thing as a free lunch”, flagging real pressure on SMEs and the self-employed, a concern echoed by Tribe Recruitment Group’s Bruce Pilbrow.

A large employer with pricing power and HR staff can bake the rise into remuneration bands. A 12-person hospitality or trades business on thin margins cannot, and will feel it in every pay review.

The self-employed sit outside the argument entirely. The Retirement Commission’s 2025 analysis found about 125,000 self-employed members were among those expected to save less after the Budget 2025 changes, because they get no employer match. None of the five policies directly addresses them. Meanwhile, a University of Waikato commentary has argued that funding higher contributions through tax cuts is effectively the government saving through a less efficient vehicle.

Low earners may not even come out ahead

The political pitch is that compulsion means better retirements. NZIER senior economist Roshen Kulwant warns it could leave low earners worse off, as forced contributions eat into emergency savings, slow mortgage repayment or push households into short-term debt. These are the same workers small employers can least afford to pay more, and the ones most likely to push hard for a pay rise to offset the hit to take-home pay.

That is the bind. Employers get the cost, workers get thinner pay packets, and the retirement gain for the lowest paid is uncertain.

What employers should plan for now

Whichever party leads the next government, the 4% rise in 2028 is already law, and the most likely coalition outcomes point further up. Fallow’s read is that NZ First would probably not block National’s plan and would happily say it did not go far enough.

Sensible firms will model a 6% employer rate into their 2028 to 2032 cost projections now, decide how remuneration will be structured in new agreements, and be upfront with staff that every extra point of KiwiSaver is part of the pay conversation. The parties are selling compulsion as a gift to retirees. The invoice arrives at the next pay round.

Sources

• NZ Herald: Five parties are campaigning on KiwiSaver changes. How would each affect you? – Brian Fallow (2026-10-25)
• RNZ: Higher KiwiSaver contributions may mean lower pay rises (2026-02-20)
• RNZ: Can New Zealanders really afford compulsory KiwiSaver? (2026-06-22)
• Treasury: Cabinet Paper CAB-25-SUB-0126, Budget 2025 Package: The Growth Budget (2025-04-11)
• RNZ: Workers could wear cost of National’s proposed KiwiSaver changes (2026-06-22)
• Retirement Commission: Analysis of KiwiSaver changes, Budget 2025 (2025)
• University of Waikato: NZ First wants a compulsory KiwiSaver. Boosting the Super Fund is a better bet
• NZ Herald: NZIER warns compulsory KiwiSaver could leave low earners worse off at retirement (2026-10-19)