A worker starting out today could live through more than fifteen elections before retirement. Eric Crampton wants them to know what that means if KiwiSaver becomes compulsory.
National has promised that, if re-elected, it will make KiwiSaver contributions compulsory from 2028, with employers and employees each paying 6 percent by 2032. Crampton, chief economist at the New Zealand Initiative, argues the case for compulsion is weaker than most people assume. Take a low-income, part-time worker who earns less than NZ Superannuation would pay. Compulsion forces that person to put money aside just when they have the least to spare. Someone borrowing to build a business might prefer to put money into that business, and compulsion might push them into more debt just to make the payment.
But set that aside, he says. Even supporters of compulsion have a problem to fix first, before the law changes and not after.
The exit door
If a future government treats your savings as its pool of capital to direct, your retirement is at risk. Today, Crampton notes, there is some protection in the option to opt out. A saver could decline to join, or stop contributing when they next change jobs, and invest elsewhere. Only money already in the fund is exposed.
Compulsion shuts that door. A pool that people can neither leave nor stop feeding, he writes, can be enormously tempting to governments.
The savings in the account are yours, he argues. The government’s contribution is $260.72 a year, small next to what workers put in, and he says anyone who feels it makes the account less than theirs should be free to decline it. The employer’s half comes out of your wages over time anyway.
Infrastructure and the UK example
The idea of pointing KiwiSaver at infrastructure is already circulating. Infrastructure-finance specialist Brad Tiller has called it the “missing link,” and the Opportunities Party’s compulsory “KiwiSaver 2.0” aims to build “a trillion-dollar capital pool to fund infrastructure and national development.”
Crampton points to Britain. Under its Pension Schemes Act 2026, if funds do not “voluntarily” put enough into “productive” assets, the government may compel default funds to hold up to 10 percent in assets it designates, with 5 percent ringfenced for British firms. The power was capped and time-limited only after the House of Lords objected that it cut across funds’ duty to their members.
His question is a pointed one. Should a Green voter’s retirement savings be compelled into Roads of National Significance? Should an ACT voter’s be conscripted for a future Green government’s environmental goals?
What he proposes
Crampton published a research note, Guardrails for a Compulsory KiwiSaver, setting out options he says can be improved. Compulsory KiwiSaver should be written into law as existing for one purpose, your retirement, a duty binding ministers as well as fund managers. If a future government imposed requirements that harmed savers, it would have to let them opt out, or else tally the cost and pay compensation. He also floats a Crown “mandate protection note” attached to every account, and a requirement that any imposed mandate be costed, with the effect on your balance printed on your annual statement.
Parliament cannot bind its successors, he concedes. It can make raiding your savings costly and visible. “If a project is worth your money on its merits, funds will invest without being told to,” he writes.
Sources
- Compulsory KiwiSaver would need guardrails to ensure Govt doesn’t direct where money is invested
- Guardrails for a Compulsory KiwiSaver
