KiwiSaver has $110 billion in assets and over three million members. Contribution rates rise from April. Both major parties want to push them to 12%. 

Everyone assumes the scheme is working. But no one can prove it.

The only rigorous evaluation of KiwiSaver’s impact on wealth was published in 2017 by Treasury economists David Law and Grant Scobie. 

Law and Scobie found that KiwiSaver members accumulated no more total wealth than non-members. Two-thirds of contributions had simply been shifted from bank accounts and term deposits into a KiwiSaver account. New Zealanders were not saving more. They were saving differently. 

Economists have long understood this. In 1954, Franco Modigliani showed that households plan their savings across a lifetime. If forced to save through one account, they save less through others. They pay down less debt or put less into the bank. Modigliani won the Nobel Prize for this work. 

Evidence from the US, Denmark and the Netherlands has since confirmed the pattern: between 50% and 80% of every mandated retirement dollar is offset by less saving elsewhere. 

The Law and Scobie study is now nine years old, and no more recent study has shown that the $110 billion programme does what it was designed to do. Regardless, we are about to make it much bigger. 

When advocates talk about raising “employer contributions,” they imply your boss is giving you something extra. Australia’s Grattan Institute studied 80,000 workplace agreements over three decades and found the opposite: when compulsory super went up, pay went down by almost the same amount. 

So why does everyone believe KiwiSaver is a success? Because $110 billion in accounts looks like new wealth. Much of it would exist anyway, in other forms. But big numbers are persuasive, and over two decades, KiwiSaver has built a constituency whose livelihoods depend on the scheme growing. 

There is also another problem. The bigger the pool gets, the more politicians eye it as a potential way to fund their preferred projects. What was sold as your retirement nest egg risks becoming a pool of capital for others to direct. 

After nearly 20 years and billions in subsidies, no one has shown that KiwiSaver has made New Zealanders wealthier. Still, the instinct across the political spectrum is to make the scheme bigger. 

Before we do, we might want to ask why we expect KiwiSaver’s next decade to deliver what the first two did not.