New Zealand is heading towards a potential retirement crisis, with an ageing population placing increasing pressure on NZ Super and the taxpayers who fund it. We sat down with Dean Anderson, CEO and founder of Kernel, to discuss whether KiwiSaver reform, changes to NZ Super and a shift in how Kiwis build wealth could help secure the future of New Zealand's retirement system.
Is New Zealand Heading Towards a Retirement Crisis?
New Zealand’s retirement crisis isn’t necessarily about NZ Super disappearing. It’s about how the country will continue funding retirement while supporting the growing demands on healthcare, education and public infrastructure.
Dean Anderson, CEO and founder of Kernel, believes the challenge comes down to a fundamental shift in New Zealand’s population.
In the 1960s, there were approximately seven workers for every retiree. By 2050, that ratio is expected to fall to just two workers for every retiree.
That’s a significant change.
Government services are largely funded through taxes collected from individuals, businesses and consumer spending. As the population ages, fewer working New Zealanders will be contributing tax revenue relative to the number of retirees relying on government support.
At the same time, the cost of NZ Super is expected to increase from approximately 5% of GDP to 8% of GDP.
That represents billions of dollars in additional expenditure, creating difficult questions about where the money will come from.
The challenge isn’t simply whether New Zealand can afford to keep paying NZ Super. It’s what the country may have to sacrifice to continue doing so.
Would that mean taking on more government debt? Spending less on healthcare, roads or education? Or fundamentally changing how retirement is funded?
These are the decisions New Zealand will need to confront over the coming decades.
Why KiwiSaver Reform Could Help Solve New Zealand's Retirement Crisis
KiwiSaver could play a much bigger role in addressing New Zealand’s retirement crisis, particularly as balances continue to grow.
Dean believes the relationship between KiwiSaver and NZ Super needs to evolve, with greater emphasis on personal retirement savings and a more targeted role for government support.
Over the next 30 years, KiwiSaver is expected to grow to more than $1 trillion in assets.
By 2070, projections discussed suggest KiwiSaver could hold between $2.2 trillion and $2.4 trillion.
That’s an enormous amount of retirement savings.
As those balances increase, New Zealanders could become less reliant on NZ Super to fund their retirement, provided the system gives them enough flexibility to manage their savings effectively.
Rather than making sweeping changes overnight, Dean advocates for a long-term approach that gradually adjusts KiwiSaver settings alongside the role of NZ Super.
The idea is to give people more control over their retirement savings while maintaining government support for those who genuinely need it.
But that raises another question: should everyone continue receiving the same NZ Super payments, regardless of their financial circumstances?
Should NZ Super Be Means-Tested?
NZ Super currently operates as a broadly universal payment, meaning eligible New Zealanders receive it regardless of how much wealth they’ve accumulated.
Dean believes that approach deserves reconsideration.
His argument is that the government’s role should be to provide a financial safety net for retirees who need support, rather than automatically providing the same payment to everyone.
For example, someone with $10 million in assets may have significantly less need for NZ Super than someone entering retirement with very little savings.
A more targeted system could potentially direct greater support towards those who genuinely depend on it.
Historically, one of the strongest arguments against means-testing has been the complexity and cost of administering it.
However, Dean believes improvements in technology could make a more targeted approach considerably easier and less expensive to manage.
But Is Means-Testing Fair?
There’s an important counterargument.
Someone who has worked and paid taxes throughout their entire career might reasonably question why they should receive less government support than someone who has contributed less.
It’s a difficult conversation, particularly for people who have spent decades planning around the existing system.
Dean’s view is that retirement policy needs to focus on what will work for future generations, rather than maintaining every historical arrangement indefinitely.
That doesn’t mean introducing sudden changes for people approaching retirement.
Instead, it means establishing a clear, long-term plan that allows New Zealanders to understand how the system will evolve and prepare accordingly.
Should New Zealand Raise the Retirement Age to 67?
Increasing the NZ Super eligibility age is another potential reform, but Dean believes it should be considered alongside changes to KiwiSaver access.
Currently, the age at which New Zealanders can generally access KiwiSaver retirement savings is linked to the NZ Super eligibility age.
If the NZ Super age were increased to 67, KiwiSaver access could also be pushed back unless the two were separated.
Dean believes these arrangements should be decoupled.
One possibility would be to allow New Zealanders to access their KiwiSaver savings from age 60 while gradually increasing the NZ Super eligibility age to 67.
This could give people greater flexibility over when and how they transition into retirement.
Could You Withdraw 10% of Your KiwiSaver Each Year?
Rather than allowing people to withdraw their entire KiwiSaver balance at 60, Dean suggests a more gradual approach.
For example, people could potentially access up to 10% of their balance each year until they become eligible for NZ Super.
This could be particularly beneficial for people working in physically demanding occupations who may struggle to continue working until 67.
Someone who has spent decades working in construction or another labour-intensive industry might need to reduce their working hours or retire earlier than someone in an office-based role.
Earlier access to KiwiSaver could help bridge that gap.
NZ Super would then provide a financial backstop later in retirement.
The aim is to balance personal responsibility with government support, while recognising that not everyone has the same retirement needs or circumstances.
These are proposed ideas for reform, rather than changes that have already been introduced.
Should KiwiSaver Contributions Be Compulsory?
Making KiwiSaver compulsory is often presented as a straightforward way to improve retirement savings.
If everyone is required to contribute, more people should theoretically accumulate savings for retirement.
But Dean isn’t convinced that compulsion is necessarily the best solution.
According to figures he discussed, approximately 90% of employees are already contributing to KiwiSaver.
Of those who aren’t contributing, around 70% earn less than $50,000.
That creates an important consideration.
For someone struggling to cover everyday living expenses, having another dollar available today may be more valuable than having that dollar locked away until retirement.
Compulsory contributions could therefore create additional financial pressure for lower-income households.
There are also challenges for self-employed New Zealanders, contractors and small business owners whose incomes and contribution arrangements may differ from traditional employees.
Rather than relying solely on compulsory contributions, Dean believes better incentives could encourage more people to save.
Could Tax Incentives Encourage More KiwiSaver Contributions?
One possibility raised was allowing a certain amount of KiwiSaver contributions to receive favourable tax treatment.
For example, a tax incentive applying to the first $5,000 contributed could encourage contractors and self-employed New Zealanders to participate more actively.
The intention would be to reward retirement saving rather than penalise those who aren’t contributing.
However, Dean is more cautious about proposals to remove tax from all KiwiSaver investment earnings.
While tax-free investment returns sound appealing, the financial cost to the government could be substantial.
There’s also the possibility that wealthier individuals could direct large amounts of money into KiwiSaver primarily to benefit from favourable tax treatment.
That could create an expensive policy that disproportionately benefits people who already have significant savings.
A more targeted incentive might provide greater encouragement to people who need help building retirement savings.
The broader point is that KiwiSaver tax policy, NZ Super, property investment and financial education all influence one another.
Changing one part of the system without considering the others could create unintended consequences.
Why New Zealand Needs to Rethink Its Obsession With Property
For decades, property has been one of New Zealand’s most popular ways to build wealth.
But Dean believes the conditions that made property such a successful investment over the past 50 to 60 years have fundamentally changed.
Historically, several factors supported rising house prices.
Interest rates fell significantly over time, allowing borrowers to service larger mortgages. Households also increasingly moved from relying on one income to two incomes, further increasing borrowing capacity.
At the same time, lending settings and the wider financial system were structured in ways that favoured property.
As borrowing capacity increased, more money could flow into housing, helping push prices higher.
But those conditions can’t necessarily continue indefinitely.
Interest rates cannot keep falling from already historically low levels, and households can’t continually add more incomes to support larger mortgages.
Dean argues that property investment now requires greater selectivity.
That doesn’t mean property is no longer a worthwhile investment.
Different regions and markets will continue to perform differently, and there may still be attractive opportunities.
However, relying on property as the default method of building wealth could become increasingly limiting.
From Property Investors to Business Investors
Dean believes New Zealand has an opportunity to shift more capital towards businesses and share markets.
Investing in companies allows people to participate in businesses developing products, services and new technologies.
Rather than concentrating so much of the country’s wealth in housing, greater investment in productive businesses could help support economic growth.
There’s also a broader social consideration.
When households need two full-time incomes and a significant proportion of their earnings to service a mortgage, it can reduce their flexibility around work, family and lifestyle decisions.
Dean believes the financial pressures associated with housing have contributed to wider social challenges, including declining birth rates.
His argument isn’t that New Zealanders who benefited from property investment did anything wrong.
Rather, the financial system created incentives that made property particularly attractive.
The opportunity now is to create a better balance between housing, investment and long-term economic prosperity.
Are New Zealanders Saving Too Much and Investing Too Little?
New Zealanders have traditionally been comfortable holding money in savings accounts, term deposits and property.
But Dean believes the country needs to move from being a nation of savers towards becoming a nation of investors.
Figures discussed suggest approximately $167 billion is sitting in term deposits.
When savings accounts are included, that figure approaches $250 billion.
That’s more than the total value of KiwiSaver and more than the entire New Zealand share market, according to the comparison Dean provided.
His concern is that too much money is sitting in cash earning relatively modest returns, potentially below inflation.
While cash savings have an important role, particularly for people who need security or access to their money, relying too heavily on cash can limit long-term wealth creation.
Investing provides an opportunity to participate in the growth of businesses and build wealth over time.
KiwiSaver has already helped introduce many New Zealanders to investing through regular contributions and managed funds.
The next step is encouraging people to understand how investing works and develop habits that support their long-term financial goals.
However, there’s an important distinction between investing and speculative trading.
Why Good Investment Habits Matter More Than Picking Stocks
Technology has made investing more accessible than ever.
People can buy shares, access investment products and trade financial instruments with relatively little effort.
But easier access doesn’t automatically lead to better financial outcomes.
Dean is concerned that some investing platforms encourage behaviours driven by short-term excitement and fear of missing out.
Products involving leverage, contracts for difference and prediction markets can introduce risks that many everyday investors may not fully understand.
Instead, he believes the focus should be on consistent investing habits.
That means understanding your goals, choosing appropriate investment options and contributing regularly rather than constantly trying to identify the next winning stock.
At Kernel, Dean says the focus is on diversification, low fees and building disciplined investing behaviours.
Many customers use automatic investment plans, allowing them to invest regularly without needing to make decisions every day.
The objective isn’t necessarily to encourage people to become more active traders.
It’s to help them become more consistent long-term investors.
Why Financial Education Needs to Start Earlier
As KiwiSaver balances grow, financial literacy will become increasingly important.
Dean believes New Zealand faces a significant challenge in ensuring people have the knowledge to manage larger retirement balances.
There are already concerns about whether the country has enough financial advisers to support the growing demand for retirement planning and wealth management over the next 20 years.
And having access to a large sum of money doesn’t automatically mean someone knows how to manage it.
One example involved factory workers who received access to substantial superannuation balances after years of earning relatively modest salaries.
For some, suddenly having access to hundreds of thousands of dollars led to significant spending on expensive vehicles rather than carefully managing the money for retirement.
It highlights the importance of financial education long before someone reaches retirement age.
Could KiwiSaver for Children Make a Difference?
Dean supports proposals that would encourage more children to participate in KiwiSaver.
According to the figures he discussed, the number of KiwiSaver members under 18 has halved over the past decade.
He sees that as a concerning trend.
Introducing children to KiwiSaver earlier could help them understand the benefits of long-term investing before they enter the workforce.
For example, a teenager who can see that money contributed to their KiwiSaver account years earlier has grown into a meaningful balance may find the concept of investing much easier to understand.
It’s more tangible than simply being told to start saving for retirement in 40 or 50 years.
Financial literacy education in schools is another important part of the picture.
However, there are challenges around how those programmes are delivered and whether teachers have sufficient support and resources.
The goal should be to help young New Zealanders develop practical financial skills, understand investment decisions and build confidence managing money.
Key Takeaways
- New Zealand’s ageing population is putting pressure on retirement funding: The ratio of workers to retirees is expected to fall from approximately seven to one in the 1960s to two to one by 2050.
- NZ Super may need to evolve: Dean believes a more targeted system could provide stronger support for retirees who genuinely need it, while reducing pressure on government finances.
- KiwiSaver will play an increasingly important role: With balances projected to grow substantially, retirement savings could become a bigger part of how New Zealanders fund their later years.
- Retirement age and KiwiSaver access don’t necessarily need to remain linked: Allowing earlier access to KiwiSaver while gradually increasing the NZ Super age could give people greater flexibility.
- Compulsory KiwiSaver isn’t necessarily the answer: Targeted incentives may be more effective for encouraging participation without creating additional pressure for lower-income households.
- Property shouldn’t be the only wealth-building strategy: The economic conditions that supported decades of property price growth have changed, making diversification increasingly important.
- New Zealand needs to think beyond cash savings: Developing a stronger investment culture could help more people build long-term wealth.
- Good investing habits matter: Regular contributions, diversification and disciplined decision-making can be more valuable than constantly chasing short-term investment opportunities.
- Financial literacy needs to start young: Helping children understand KiwiSaver and investing could better prepare them to manage their money and retirement savings in the future.
Next Steps
If you’re unsure whether your KiwiSaver, investments and wider retirement strategy are putting you on track for the future, get in touch with Lighthouse Financial’s wealth team to review your options and build a financial plan around your goals.
Learn more about Kernel and their investment options, here.
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Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
