Kiwisaver was a policy initiative introduced with a big hiss and a roar by Michael Cullen back in the Helen Clark government in May 2005.
Convinced that he had single handedly created a government fiscal surplus through his superior fiscal rectitude, he seemed to think no one was as good at saving as him. What was pulling the good doctor’s testicles was his view that average Jack and Jill New Zealander sucked so badly at saving that now every one else in the world owned our stuff.
In his heart of hearts, he probably thought that collectively we had flogged off nanna’s gold rings to Foreigners and had all nipped off down to the pub.
“Madam Speaker, as I indicated earlier, we are forecasting substantial current account deficits over the next four years. While a more realistic level of the New Zealand dollar will eventually bring that deficit back to more comfortable levels, the fact remains we have run significant current account deficits for nearly all our history as a nation.
That, and a range of other indices, point to a low level of household savings in New Zealand. We are left highly dependent on foreign capital, which means a substantial proportion of our national income is reclaimed by foreigners as theirs. Hence the fact that our Gross National Product is significantly less than our Gross Domestic Product.
New Zealanders often bemoan the consequences of low saving, such as high levels of foreign ownership. But, if we are to own, literally, more of our future we must lift our level of savings.
Three areas are of particular interest: saving for retirement, saving for home ownership, and saving for the costs of one’s children’s tertiary education.
Rather than fix the issues constraining supply and distorting prices in the housing market, Cullen waggled his pointy finger at households not being able to save. We had lost the habit. We’d gotten financially flabby and lazy. We no longer did push-ups in the morning, or take cod-liver oil to stay financially regular.
Our young people were such profligate spenders, they couldn’t save for their first home. Financially ignorant households were not saving for their children’s tertiary education (because we’re a nuclear family, right? And we need more lawyers, not builders or plumbers…). New Zealander’s lived ‘willy-nilly’ for-the-day, and without proper serious regard for our retirement.
Dr Cullen knew better and was going to prescribe the medicine to mend our feckless ways. Kiwisaver was just the nanny-state type-of-policy that would do it. And the spin-off was that it would be oodles of domestic cash slushing around in New Zealand’s financial system that we would all end up owning our stuff again from Foreigners who kept buying our toys and stealing all of our delicious cookies.
Using good ol’ nudge economics, everyone 16-65 got automatically enrolled in Kiwisaver, subject to you opting out. If you stayed in, the government gave you a $1000. You contributed and your employer was forced to contribute too.
Households weren’t given a lot of choice or flexibility around how they could use their savings. KiwiSaver was linked to a home ownership scheme to assist “modest to middle” income families with the deposit for a first home. Those who were KiwiSavers for a minimum of three years qualified for an additional subsidy of $1,000 a year up to a maximum of five years at the time of purchase of their first home. They would be able to draw down all of their accumulated savings as KiwiSavers except for the initial $1,000 upfront contribution. There will be conditions in relation to the total household income of the applicants and the value of the house being purchased.
I was in. I was also self-employed, so I channelled a truckload of cash into kiwisaver, and milked all of the delicious government contributions for the next 20 years.
Paternalistic policies from a long-departed government
And my mortgage grew and grew and grew… a new roof, new housing foundations, new kitchen, a relationship split, a massive tax bill… from $135,000 in 2015 it blew out to $380,000 at its peak in 2022-2023. On the flip side, Kiwisaver – something I couldn’t touch for the next 25 years – increased from the government’s $1000 starter in 2005 up to $280,000
While Kiwisaver was generating a nominal 3.00 – 3.50%, my mortgage was costing me a nominal 5.00 – 6.00%. It made absolutely no economic sense to have untouchable money earning a smaller interest rate while at the same time, increasing debt which was costing a higher interest rate. If I could shift my financial assets around, then my Kiwisaver balance, rather than earning me 3.0 – 3.5% would be saving me 5.0 – 6.0% by reducing my mortgage.
When I did the modelling on my mortgage, my $311,754 mortgage (as at Sept 2025), had a weighted average interest rate of 5.9576%, and a 15 year repayment horizon. Over the next 15 years, that $312,000 mortgage will cost me $1266 per fortnight and, after 15 years, I would have paid $458,000 to the bank, and they would have received $147,000 worth of pure interest for their money.
As at November 2025, my Kiwisaver balance stood at $270,000. If I used my Kiwisaver to pay off my mortgage, and carried on fortnightly contributing to my own savings plan, rather than Westpac’s mortgage, then after 15 years, I would have $458,000 in the bank plus interest not less interest.
Welcome to Middle New Zealand who has to just live with the stupidity of a bygone government’s paternalistic policy.
The deadhand of Michael Cullen, from beyond the grave, continued to mess around and play fuckery with my household balance sheet, and there was nothing I could do about it. None of Kiwisaver’s withdrawal exemptions applied – I wasn’t buying my first home, I wasn’t in financial hardship, I hadn’t left the country, or gotten a terminal diseased.
That’s like one of the worst things about New Zealand – we have to live with and continued to be ruled by so many dead policies from long-gone governments. And once Kook of the Day gets in and legislates, we live with their bonkers ideas for decades – well beyond their parliamentary terms.
Migrating from New Zealand – financial freedom
Three weeks ago something magical happened: I had been in New Caledonia for one year! What makes this so special was I now qualified for one of the exclusions from Kiwisaver – the permanent departure rule. After you’ve been living overseas – not Australia – for 1 year, you can take most of the savings from your KiwiSaver account.
You can withdraw:
- your contributions
- your employer’s contributions
- the $1,000 kickstart (if you got it)
- fee subsidies (if you got these)
- interest you have earned.
… but you cannot take out the government contributions – that gets retained by IRD.
Once all the contributions hit your Kiwisaver account, doesn’t it make sense that you get to keep these?!? Why does the government get to withdraw “its” funds once they’ve gone into “your” superannuation scheme?
All of the delicious government contributions I thought I was milking for the 20 years I was in the scheme was bullshit. The government took all of them (except for the $1000 paid 20 years ago) back. Cashing in my Kiwisaver resulted in the government stealing keeping $8500 that it had contributed over the last 20 years.
One final point on government withholding their contributions…
If the government is going to withhold “its” contributions then why can’t we withdraw the remainder, which is “our” money, when ever we want to and for any purpose we care for?
This is why Kiwisaver is pure nanny-state. If the government is going to withdraw “its” money from the amounts returned to savers, then there’s no reason to have these criteria which govern when people can withdrawing their funds. The funds, after the government has deducted their contributions was alway’s the saver’s money. Through taking their contributions back, the government should lose any rights to tell you how to use your money.
And if you want to vote with your feet and permanently emigrate to Australia, then there should be no exclusions against accessing your funds in Australia if the New Zealand government takes back is contribution before returning them to emmigrants.
The upshot of leaving New Zealand
I’ve been able to:
- Reduce my mortgage to $40,000, which I will pay off as quick as possible.
- Ditch the Australian Bank mortgage that was leeching blood from my finances.
- Ditch Kiwisaver which will increasingly become a “government policy tool”, as seen here and because of this issue here.
I predict in the next 20 years, those with a Kiwisaver balance will be forced to use that before becoming eligible for superannuation – as identified by Treasury:
We expect fiscal pressures to accelerate in coming decades. Population ageing will increase the cost of providing retirement income. Most New Zealanders aged over 65 receive a pension paid out of general taxation, known as New Zealand Superannuation or NZS. The number of New Zealanders receiving NZS is rising faster than the number of New Zealanders aged 15-64, the age bracket that pays the most tax revenue. In the 1960s there were seven New Zealanders aged 15-64 for every Kiwi aged over 65. Now there are four, and in 2065 there are projected be two. As the age structure of the population changes, the cost of maintaining NZS in its current form will rise. NZS expenditure was 3.9% of GDP in 2006, is 5.1% now, and if current policies are maintained is expected to grow to around 8% of GDP by 2065.
- Expand my career prospects.
- Travel throughout the pacific as part of my job.
- Live a much healthier and better life than I had working in Wellington.
Economics Explained describes “Why Everyone is Leaving New Zealand” – my take is why do people stay?