A review of international experience

Partial savings withdrawal for purchase of a first home. Some own and 
employer KiwiSaver savings can be withdrawn in order to purchase a first home. 
The government contribution (the kick-start payment and the member tax 
credit) cannot be withdrawn.
 
• First home deposit subsidy. After three years of contributing to KiwiSaver, con-
tributors may be entitled to a first home deposit subsidy. The subsidy, admin-
istered by Housing New Zealand, is paid on the day the purchase is settled. 
The subsidy is $NZ 1,000 for each year of contributions, up to a maximum of 
$NZ 5,000 for five years. A couple buying a house together and both qualifying 
could receive a combined subsidy of up to $NZ 10,000.
Tax Treatment
Employer contributions to any retirement saving scheme in New Zealand are deduct-
ible by the employer for tax purposes but are subject to the Employer Superannuation 
Contribution Tax. This tax, which has been in place in one form or another since 1990, 
taxes employer contributions to voluntary retirement schemes on the grounds that these 
schemes are an additional form of remuneration. Initially, employer contributions to 
KiwiSaver were given an exemption from the Employer Superannuation Contribution 
Tax on the compulsory employer contribution of 2 percent of earnings, but this exemp-
tion was withdrawn April 1, 2012. No concessional tax treatment of the earnings on 
investment is provided for any retirement scheme, including KiwiSaver. All retirement 
schemes are taxed on a proxy basis, as if the payments were the income of the member.
KiwiSaver Providers
Private financial services companies, known as KiwiSaver providers, manage the schemes. 
Inland Revenue assigns people who do not choose their own scheme and whose employer 
does not have a scheme to one of the six government-appointed default providers. Alloca-
tion to a provider is done one by one on a serial basis.

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MATCHING CONTRIBUTIONS FOR PENSIONS: A REVIEW OF INTERNATIONAL EXPERIENCE
The companies appointed as default providers were chosen following a competitive 
tender and a detailed evaluation process. They were selected based on a number of criteria, 
including security and organizational credibility, organizational capability, scheme struc-
ture, administrative capability, fee levels, and investment capacity/capability.
Seven companies applied to be default providers. Although a regulation could have 
been made under the KiwiSaver Act capping the number of providers, none is apparent, 
and it is unclear on what basis the limit was set at six.
The default providers’ contract with the government requires them to meet addi-
tional reporting requirements and limits the fees they can charge. There is also additional 
monitoring of their default funds (they may also offer other KiwiSaver funds).
6
 Default 
funds are required to be invested conservatively, with the percentage of growth assets to be 
kept to 15–25 percent of total assets.
The mandate of the existing default providers is to be reviewed in 2014. An initial 
review, which will commence in late 2012, will set out to answer the following broad 
questions:
 
• How have existing default arrangements performed from operational, adminis-
trative, regulatory, and policy effectiveness perspectives?
 
• What should be the objectives for the default provider arrangements, and what 
are the best institutional arrangements and investment settings for delivering 
these objectives?
 
• What is the optimal process for managing any transitions from existing 
arrangements?
Providers other than the default providers are also required to enter into agreements 
with the government, setting out their duties and responsibilities, but no limit exists on 
the number of providers (and although some market observers have suggested amalgama-
tion should be occurring, there is little sign of that). At last count, there were 52 registered 
providers, including the 6 default providers. These providers may offer more than one 
investment choice. There is no constraint on the nature of investment choice and assets, 
but the potential member must receive an investment statement describing the nature of 
the investment and its risks.
Other
Initially, each member received a fee subsidy of $NZ 40 a year, and employers had their 
compulsory contribution subsidized through an employer tax credit of up to $NZ 20 a 
week per member. Both these subsidies were discontinued on April 1, 2009.
Contributors can change their KiwiSaver scheme at any time, but they can belong 
to only one KiwiSaver scheme at a time. To change their scheme, contributors must apply 
directly to the provider of the scheme they want to join. The new provider will arrange 
for savings to be transferred from the old scheme to the new one. With the exception of 
default funds, the old scheme may charge a transfer fee.
All KiwiSaver schemes are regulated by the Financial Markets Authority, in a similar 
way as other registered retirement schemes. One difference is that all KiwiSaver schemes 
are required to pay fees that are “not unreasonable.” The process, set out in the KiwiSaver 
regulations, requires the Financial Markets Authority to compare fees with those of other 

5.  NEW ZEALAND’S EXPERIENCE WITH THE KIWISAVER SCHEME 
111
comparable schemes (which need not be KiwiSaver schemes). The regulations cite a num-
ber of criteria for the comparison, including the structure of the scheme, the number of 
members, and the asset base of the scheme. The fact that the process is based on compari-
son rather than absolute amounts may not encourage low fees, particularly as information 
on fees is difficult to standardize. However, providers claim that they cannot afford, under 
current fees, to remunerate financial advisers to give members individual advice. In the 
May 2012 budget, the government directed more work on disclosure of fees and invest-
ment returns in a standardized fashion.
OUTCOMES
The government set aside funding for a comprehensive evaluation program as an integral 
part of setting up KiwiSaver. Initial reports were biannual; recently they have been con-
ducted annually.
7
 This section summarizes the most recent evaluation report, for the year 
ending June 30, 2011, and provides some supplementary material on asset allocation.
Enrollment Patterns
People can become KiwiSaver members in three ways: 
 
• Automatic enrollment occurs when employees are automatically enrolled upon 
employment and they do not opt out. Enrollees can specify a provider or accept 
the provider sponsored by their employer (if there is one). If they do neither, they 
will be assigned to a default fund.
 
• Opt-in through an employer occurs when an employee chooses to join the 
KiwiSaver scheme sponsored by the employer.
 
• Opt-in through a provider occurs when people enroll directly through a provider. 
Table 5.1 shows the ways in which KiwiSavers have enrolled in the program since its 
inception.
Opt-in through a provider has been a significant part of enrollment from the outset; 
after netting opt-outs from automatic enrollments, it has become the predominant means 
of enrollment. Opt-ins include many people under age 18, as described below, and can 
reasonably be attributed to the desire to obtain the kick-start subsidy.
Opt-ins through employers were initially high, in large part thanks to the kick-start 
subsidy and member tax credit. Some employees worked for employers that did not offer 
a retirement scheme and who would have not required a great deal of motivation to join.
Figure 5.2 shows how opt-in through providers and employers has outstripped 
automatic enrollment on a cumulative monthly basis. Actual monthly enrollments were 
broadly stable, at about 25,000 a month from August 2008 through June 2011. Sub-
sequently, enrollments fell to about 10,000 a month, possibly because of a more diffi-
cult labor market, tougher economic times, the reduction in member tax credit, or some 
degree of satiation.
Forty-four percent of the eligible population is enrolled in KiwiSaver. Enrollment is 
not evenly distributed by age (figures 5.3 and 5.4). People age 25–44 have been the most 
consistent joiners. Unsurprisingly, people closer to retirement opted in to a greater degree 
at the beginning, given the five-year minimum membership before being able to withdraw 

112 
MATCHING CONTRIBUTIONS FOR PENSIONS: A REVIEW OF INTERNATIONAL EXPERIENCE
savings and perhaps a realization of inadequacy of retirement provision. Enrollment 
among people under age 18 was slow at the beginning but may have been influenced sub-
sequently by greater awareness of the significant kick-start payment on enrollment. The 
distribution by sex has been 52 percent women more or less constantly over the period.
TABLE 5.1  Total cumulative enrollment in KiwiSaver, 2008–11
Enrollment 
status 
2008 2009 2010 2011 
Automatic enrollment
273,279 
426,629 
541,769 
646,725 
Opt-in through employer 
169,410 
195,940 
211,883 
232,131 
Opt-in through provider 
273,948 
477,971 
706,290 
877,076 
% increase over previous year 
n.a. 
54 
33 
20 
Total net enrollment
716,637
1,100,540
1,459,942
1,755,932
Opt-out 
137,762 221,045 245,898 249,549 
Closed 1,044 
8,240 
13,656 
25,559 
% increase over previous year
n.a. 
55 
29 
18 
Total gross enrollment
855,443 1,329,825 1,719,496 2,031,040 
Eligible population (age 0–65) 
3,746,700
3,787,100
3,814,700
3,823,600
SOURCE: Inland Revenue 2011.
NOTE: Figures are as of June 30. n.a. = not applicable.
FIGURE 5.2  Total and monthly enrollments in KiwiSaver, 2007–11
0 
20 
40
60
80
100
120
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Aug. 2007 
Oct. 2007 
Dec. 2007 
Feb. 2008 
Apr. 2008 
June 2008 
Aug. 2008 
Oct. 2008 
Dec. 2008 
Feb. 2009 
Apr. 2009 
June 2009 
Aug. 2009 
Oct. 2009 
Dec. 2009 
Feb. 2010 
Apr. 2010 
June 2010 
Aug. 2010 
Oct. 2010 
Dec. 2010 
Feb. 2011 
Apr. 2011 
June 2011 
monthly enrollment (thousands) 
total enrollment (millions) 
total net opt-ins 
total net automatic enrollees 
monthly enrollment 
SOURCE: Inland Revenue 2011. 
NOTE: Enrollments for July and August 2007 were combined. 

5.  NEW ZEALAND’S EXPERIENCE WITH THE KIWISAVER SCHEME 
113
People under age 18 have relatively low rates of enrollment; people entering the 
workforce (where they are exposed to automatic enrollment) have relatively high rates of 
enrollment. There is also a slight overrepresentation at older ages, where consciousness of 
impending retirement is higher (the effect of a shorter time frame in which to obtain the 
subsidy may have an influence as well).
FIGURE 5.3  Age at which member enrolled in KiwiSaver, 2007–11
 
0
20
40
60
80
100
July–Aug. 2007 
Sep–Oct. 2007 
Nov–Dec. 2007 
Jan–Feb. 2008 
Mar–Apr. 2008 
May–June 2008 
July–Aug. 2008 
Sep–Oct. 2008 
Nov–Dec. 2008 
Jan–Feb. 2009 
Mar–Apr. 2009 
May–June 2009 
July–Aug. 2009 
Sep–Oct. 2009 
Nov–Dec. 2009 
Jan–Feb. 2010 
Mar–Apr. 2010 
May–June 2010 
July–Aug. 2010 
Sep–Oct. 2010 
Nov–Dec. 2010 
Jan–Feb. 2011 
Mar–Apr. 2011 
May–June 2011 
period of enrollment 
0–17 years 
18–24 years 
25–34 years 
35–44 years 
45–54 years 
55+ years 
% joining each period
SOURCE: Inland Revenue 2011. 
NOTE: All fi gures are as of June 30. 
FIGURE 5.4  Age distribution of KiwiSaver members and KiwiSaver eligible population, 
June 30, 2011 
0.000 
0.005 
0.010 
0.015 
0.020 
0.025 
0.030 
0  3  6  9  12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 
% of population 
age
KiwiSaver members
eligible population 
SOURCE: Inland Revenue 2011.
NOTE: The eligible population, taken from the Treasury long-term fi scal model, includes all New Zealand citizens or resi-
dents under age 65, regardless of whether they have joined the scheme.

114 
MATCHING CONTRIBUTIONS FOR PENSIONS: A REVIEW OF INTERNATIONAL EXPERIENCE
The age distribution year on year shows a similar pattern, as the number of enrolled 
members has grown (figure 5.5). Nearly 60 percent of eligible people age 18–24 are mem-
bers; older people are at or close to the 50 percent mark. 
FIGURE 5.5  Percentage of eligible population enrolled in KiwiSaver, 2008–11
age
0.0 
0.1 
0.2 
0.3 
0.4 
0.5 
0.6 
0.7 
0  2  4  6  8  10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 
% of eligible individuals enrolled 
2008 
2009 
2010 
2011 
SOURCE: Inland Revenue 2011. 
NOTE: The eligible population, taken from the Treasury long-term fi scal model, includes all New Zealand citizens or resi-
dents under age 65, regardless of whether they have joined the scheme. Data are as of June 30.
Incomes and Contributions 
The incomes of members do not differ greatly from the incomes of the eligible population 
(figure 5.6). There are slightly lower proportions of KiwiSaver members at low-income 
levels (up to $NZ 20,000) than in the eligible population, but slightly higher proportions 
at income levels of $NZ 20,000–$NZ 50,000. These results suggest a minor affordability 
effect.
Table 5.2 shows the number of KiwiSavers by source of income. More than half 
(54 percent) had only wage or salary income; 23 percent had no income. Children (people 
under age 18) made up 73 percent of the no income group. This group also includes full-
time students aged 18 and over, who are allowed to make contributions (or have their 
families make contributions on their behalf ) and who are therefore eligible for the mem-
ber tax credit despite not working or paying income tax.
On April 1, 2009, the default rate for contributions was reduced from 4 percent to 
2 percent. Table 5.3 shows the effect of the change.
The data in table 5.3 suggest a marked signaling effect through the change in the 
default rate. Table 5.4 reinforces this interpretation. The majority of people (62 percent) 
who joined KiwiSaver before April 1, 2009, still contribute 4 percent of their gross income, 
indicating a significant degree of inertia in contribution rates, a phenomenon observed in 
similar saving programs. The majority of members who joined KiwiSaver after April 1, 
2009 (80 percent), are contributing 2 percent, reinforcing the importance of the default 
rate in establishing participation patterns.

5.  NEW ZEALAND’S EXPERIENCE WITH THE KIWISAVER SCHEME 
115
The median annual contribution in 2009/10 was $NZ 880, with the lowest quartile 
contributing $NZ 295 and the highest quartile contributing $NZ 1,644 (figure 5.7).
These data relate to members with salary and wage income. People not earning sal-
ary or wage income can still contribute and are incentivized to do so (if over age 18) 
by the member tax credit subsidy. Figure 5.8 shows the annual contributions of people 
with income from sources other than salary or wages. The two peaks at $NZ 1,040 and 
$NZ 1,200 suggest that people who do not make contributions through salary or wage 
deductions are clustered at the maximum thresholds, consistent with contributing to max-
imize the value of the member tax credit.
People with no income at all also exhibited twin peaks at $1,040 and $1,200, pre-
sumably for the same reason (figure 5.9).
FIGURE 5.6  Income distribution of KiwiSaver members and KiwiSaver eligible population, 2010
0.00 
0.05 
0.10 
0.15 
0.20 
0.25 
1–
10,000 
10,001–
20,000 
20,001–
30,000 
30,001–
40,000 
40,001–
50,000 
50,001–
60,000 
60,001–
70,000 
70,001–
80,000 
80,001–
90,000 
90,001–
100,000 
100,001–
110,000 
110,001–
120,000 
>120,000 
%
income (NZ$) 
KiwiSaver members 
eligible population 
SOURCE: Inland Revenue 2011.
NOTE: Figures are for members as of June 30, 2011. Income relates to the 2010 tax year and includes income from sal-
ary and wages (including benefi t payments) as well as income from self-employment, royalties, rental income, and other 
sources. People with no income in 2010 are excluded. 
TABLE 5.2  Income sources of KiwiSaver members, 2010
Income source
Number of members
Percentage of total
Salary or wage income only 
945,917 
54 
Salary or wage plus other income 
324,361 
19 
Other income only 
76,306 
 4 
No income 
409,348 
23 
Total 1,755,932 
100 
SOURCE: Inland Revenue 2011.
NOTE: Figures are for members as of June 30, 2011. Income relates to the 2010 tax year and includes income from sal-
ary and wages (including benefi t payments) as well as income from self-employment, royalties, rental income, and other 
sources.

116 
MATCHING CONTRIBUTIONS FOR PENSIONS: A REVIEW OF INTERNATIONAL EXPERIENCE
FIGURE 5.7  Annual KiwiSaver contributions by salary and wage earners, 2009/10
0 
20 
40 
60 
80 
100 
cumulative percentile (%)
0 1,000
2,000
3,000
4,000
5,000
contribution amount (NZ $)
75% quintile
median
NZ$ 1,644
NZ$ 880
NZ$ 295
NZ$ 5,600+
25% quintile
SOURCE: Inland Revenue 2011.
NOTE: Figure includes contributing members with a member tax credit (MTC) claim submitted for 2009/10 with salary and 
wage income only for the 2010 tax year; benefi ciaries are excluded. Only members age 18 and over are eligible to make 
MTC claims. Contributions include employee deductions through the PAYE system, voluntary contributions directly to 
providers, and ad hoc contributions to Inland Revenue not through the PAYE process. Figures do not include employer 
contributions. 
TABLE 5.3  Percentage of KiwiSavers 
contributing at various rates, 2009–11 
Contribution 
rate (%)
2009
2010
2011
2 
12 41 53 
4 
83 55 43 
8 
4 4 4 
Other 
< 1 
< 1 
< 1 
Total 
100 100 100 
SOURCE: Inland Revenue 2011. 
NOTE: Figures include all members with PAYE deductions 
as of June 30, excluding members on contribution holi-
days and members who contribute directly to providers or 
make ad hoc contributions to Inland Revenue not through 
the PAYE system. Members’ contribution rate at year end 
is based on at least two contributions over the April–June 
period. Totals may not sum to 100 percent because of 
rounding.
TABLE 5.4  Contribution rates of KiwiSavers by 
member join date, as of 2011
Contribution 
rate (%)
Before April 1, 
2009
After April 1, 
2009
2 33 
80 
4 62 
18 
8 
 5 
 2 
Other 
< 1 
< 1 
Total 100 
100 
SOURCE: Inland Revenue 2011.
NOTE: Figures include all members with PAYE deductions 
as of June 30, 2011, excluding members on contribution 
holidays and members who contribute directly to provid-
ers or make ad hoc contributions to Inland Revenue not 
through the PAYE system. Members’ contribution rate at 
year end is based on at least two contributions over the 
April–June period. Totals may not sum to 100 percent 
because of rounding. 

5.  NEW ZEALAND’S EXPERIENCE WITH THE KIWISAVER SCHEME 
117
Member Tax Credit 
Table 5.5 shows the proportion of members who received the maximum tax credit. Claims 
for the maximum were low in 2008 (14 percent) but rose to 46 percent in 2009 and 
45 percent in 2010.
Figure 5.10 shows the distribution of the member tax credit by age. The lower cred-
its paid to younger people are believed to reflect their lower earnings. The higher payments 
to older people may indicate a focus on maximizing the subsidy as retirement approaches. 
FIGURE 5.8  Annual KiwiSaver contribution for nonsalary and nonwage earners, 2009/10
0 
5 
10 
15 
20 
(%)
0 1,000
2,000
3,000
4,000
5,000
contribution amount (NZ $)
6,000
$NZ 0 
$NZ 1,200
$NZ 1,040
$NZ 6,000+ 
SOURCE: Inland Revenue 2011. 
NOTE: Figure includes all KiwiSavers who submitted a member tax credit claim for 2009/10 but for whom no salary or wage 
income was recorded through the PAYE system for the 2010 tax year.
FIGURE 5.9  Annual contribution by KiwiSavers with no income, 2009/10
0 
5 
10 
(%)
0 500
1,000
1,500
2,000
2,500
contribution amount (NZ $)
3,000
$NZ 1,200
$NZ 1,040
$NZ 3,000+ 
SOURCE: Inland Revenue 2011.
NOTE: Figure includes all KiwiSavers who submitted a member tax credit claim for 2009/10 who earned no income in 2010. 
Most of the 23 percent of members with no income are under age 18.

118 
MATCHING CONTRIBUTIONS FOR PENSIONS: A REVIEW OF INTERNATIONAL EXPERIENCE
Providers
Since 2008, there has been a steady increase in the share of KiwiSaver members who 
choose their own scheme. Between 2008 and 2011, the share of members allocated to 
default schemes declined by 12 percentage points, the share of members in employer-
nominated schemes fell by 3 percentage points, and the share of members actively choos-
ing to join the scheme rose by 15 percentage points (table 5.6).
Members are able to transfer between schemes, including transferring from the 
scheme nominated by their employer to another scheme (table 5.7). Transfer may occur 
during the eight-week opt-out period following automatic enrollment; members may also 
transfer from one scheme to another at any time. Transfers across schemes are referred to 
as “standard” transfers. 
Standard transfers number about 110,000 a year, about 6 percent of member-
ship (figure 5.11). Matthews (2011) suggests that people who switch tend to switch to a 
scheme run by their bank. Providers claim that they are not able to remunerate financial 
FIGURE 5.10  Member tax credit granted to KiwiSavers, by age, 2011
 
0
20
40
60
80
100