5% is the magic savings number
Research suggests a savings rate of 5% of net income after KiwiSaver contributions, matched by an equal employer contribution, would be sufficient to provide a retirement income for thej majority of KiwiSaver members pre-retirement income.
Friday, October 10th 2025, 12:12PM 
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Actuaries think KiwiSaver statements should display the adequacy of savings rates and balances in providing income in retirement and that this may require regulating.
There are various different methods of estimating likely retirement income but the New Zealand Society of Actuaries (NZSA) says basing the information on an individual KiwiSaver’s actual net income after KiwiSaver contributions would provide the best indication to individuals.
This method could also be applied consistently to all KiwiSaver accounts, the NZSA says.
Modelling by NZSA’s Retirement Income Interest Group (RIIG) finds that a savings rate of 5% of net income after KiwiSaver contributions, matched by an equal employer contribution, would be sufficient to provide a retirement income of between 80% and 100% of the KiwiSaver’s pre-retirement income and with that income lasting to at least age 90.
“On balance, RIIG suggests that the default level of KiwiSaver contributions should be set so the median earner is likely to achieve our definition of adequacy with a modest buffer against adverse changes in the savings phase,” NZSA says.
The current default KiwiSaver contribution rate is 3% for both employees and employers and will rise to 3.5% from April 1, 2026 and to 4% from April 1, 2028.
KiwiSaver statements are currently required to show both the individual’s actual savings and a projection or illustration of what that balance could grow to by age 65 and what income could be drawn down from that until age 90.
The Ministry of Business, Innovation and Employment regulates the key assumptions KiwiSaver providers must use in making such calculations so that providers cannot create confusion by, for example, using unlikely investment returns to boost the projected savings balance, and so that savers see a similar communication every year from their provider.
NZSA says “it would help savers if these advantages were extended to ensure that targets for retirement income adequacy on annual statements are consistent across the market.”
It prefers using the saver’s own current income to estimate likely retirement income over other common methods of assessing the adequacy of savings rates, which include using the actual spending of current retirees and a hypothetical spend based on a shopping basket of what items retirees spend on.
NZSA says the results of the other two methods are difficult to interpret for tomorrow’s retirees and that the outcome of all three of these methods can be confusing.
For example, the Retirement Expenditure Guidelines currently suggest target retirement savings balances for a single household range from $48,000 to $271,000 across two spending levels and regions of NZ.
But a replacement income approach on a median income suggests $605,000 if spending is assumed to increase with inflation or $375,000 if not.
“This wide range of answers makes it likely that people will be confused about how much they should save, and that commentary will be misleadingly headlined without context,” NZSA says.
The modelling provides for gaps in contributions, such as for first-home withdrawals or early retirement, acknowledging such gaps are likely to occur in many people’s lives.
In Australia, the current default contribution rate, which doesn’t include any employer contribution but is paid by employers on behalf of their employees, is 12% of the employee’s ordinary time earnings.
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We are not discussing how to manage individuals who aren't employed by choice or circumstance, as they still require some form of support.
A few factors in this are:
Housepeople (of all genders) who have not developed a career and have stayed home to look after the family. With 60% of marriages failing, a significant number of these people face financial challenges later in life when they can least afford to catch up and have poor occupational skills as a result of previous life choices.
People who have failed, not always through their own fault, and have fallen on desperate times, with bankruptcy and financial stress forcing the sale of assets and financial hardship claims against KiwiSaver.
People with disabilities, some long-term lifelong that have never worked, and some who are struggling due to events in their working life.
Insurance can only provide limited assistance. Income cover will help people reach retirement, but only at a lower level than their current income, and often not enough to maintain their previous savings. And they had to be workers in the first place. (Even with retirement protection options enabled)
We have been discussing the use of Trauma over it in the insurance section, where the average claim is relatively low and not sufficient for these sorts of needs. And it is unlikely to change, with budget pressures often dictating the level of coverage remaining for claims.
TPD remains underutilised and challenging to claim, particularly when it is in place for private insurance purposes. This benefit is often forgone in favour of ensuring medical and disability support, a decision often influenced by budget constraints.
We have a distinct lack of education in society around financial planning, with an unreasonable focus on property as a wealth vehicle.
What is being done to directly address this knowledge gap?
We appear to have a profound societal distrust of the markets and managed funds, which appears to stem from New Zealand's experience with the 1987 market crash and the dot-com bubble in 2000. Not to mention the finance company crash that has kept people skittish about investing.
Where's the research on people's knowledge and attitudes towards these issues to inform education and change?