How to Bridge the Retirement Savings Gap

For New Zealand’s growing self-employed workforce (which is estimated to be more than 420,000 people, including tradies, contractors, healthcare workers, creative freelancers, consultants, and gig workers), the challenge of saving for retirement looks very different from that of employees.

A new report from the Retirement Commission highlights that the self-employed are “falling behind employees when it comes to saving for retirement.”

While around 78% of employees are active KiwiSaver contributors, the report highlights that just 44% of self-employed people are contributing members. A further 41% are members but not contributing, and n15% are not members at all. 

Why the Self-Employed Save Less

The report identifies three main reasons for lower KiwiSaver engagement: 

• Irregular income and financial strain: “Nearly half (46%) of sole traders in Hnry’s Sole Trader Pulse survey cite a lack of spare income as the main barrier to KiwiSaver saving.”
• Voluntary participation: Employees are auto-enrolled and benefit from employer contributions, but self-employed workers must opt in and receive no employer top-ups.
• Preferences and awareness: Many prefer to invest in their own businesses or keep savings liquid for emergencies, while others are unaware of KiwiSaver incentives.

On average, the report highlights that employees contribute 3.7% of gross earnings and receive an additional 2.9% from their employer. Self-employed contributors average just 2.6% of annual income, which the report states is “less than half as much overall.”

The Commission warns that “many self-employed people risk reaching retirement with little private savings.” This risks widening inequities between employment types and will ultimately put more pressure on taxpayer-funded support such as NZ Super.

Maximising KiwiSaver as a Self-Employed Person

So, while we agree with the Retirement Commission that policy change is needed, we’ve also come up with a few practical steps that self-employed Kiwis can take to get ahead: 

1.      Always aim to get the Government contribution  

Even with the Budget 2025’s reduction, the annual Government Contribution of up to $260.72 is still ‘free money’ for contributing members. To receive the full amount, you’ll need to put in at least $1042.86 each year. 

2.      Set-up an automatic payment and contribute a percentage of your income

Rather than lump sums at the end of each year, aim to contribute regularly – ideally at least 3-4% of your income.

3.      Use KiwiSaver as your growth engine

The report highlighted that self-employed people are more likely than employees to rely on bank savings accounts or term deposits. While safe, relying on savings accounts can limit long term wealth accumulation as you will miss out on potentially larger investment returns over time. KiwiSaver growth, aggressive or balanced funds typically provide stronger returns than bank or term deposits. 

4.      Be flexible

While it’s a great idea to always maintain a minimum level of contributions, because income levels can be irregular for self-employed people, try and contribute more in months when your earnings are higher. Even small additional amounts contributed sporadically will add up over time and with compounding interest, can make a big difference at retirement.

5.      Start early and stay consistent

The Commission found that many self-employed under-invest during mid-life and only try to catch up later. But delaying reduces the benefits of compound growth — small contributions now will always outweigh big catch-ups later.

Looking ahead

The Report has suggested several policy updates that it believe will help improve outcomes for the self-employed, which include:

• Improving data collection to better inform decision making.
• Automatic enrolment through tax returns or accounting platforms.
• Flexible and hybrid contribution models, such as percentage-of-income payments.
• Targeted incentives for lower-income self-employed, who are least likely to benefit from the current structure.
• Reviewing learnings and innovations from other markets, such as a “sidecar” savings model, where contributions are split between a pension and an emergency savings account.  Once the emergency fund reaches a set limit, further contributions flow into the pension, which helps to address income volatility and liquidity concerns.

International evidence supports these ideas. In Australia, self-employed workers contribute an average of 7.6% of income (nearly two and a half times the New Zealand rate) reflecting the influence of the Superannuation Guarantee. In the UK, opt-out enrolment trials lifted self-employed participation from 25% to over 90%.

Threefold’s Perspective

KiwiSaver remains one of the most effective ways for self-employed New Zealanders to build up long-term wealth. While the current system has gaps, individuals can still make meaningful progress by contributing consistently, leveraging government incentives, and choosing an investment fund that matches their goals. 

At Threefold, we encourage our self-employed clients to treat retirement saving as a core business cost and to make regular contributions. This way, a nest egg can be built up to provide more options and security for the future. 

If you are self-employed and want to know how best to maximise your retirement savings, book a free KiwiSaver review and we’d be happy to help.

Plus, if you book a KiwiSaver, mortgage or insurance review this month, you’ll go in the draw to win a month’s mortgage repayments on us, up to the value of $5,000! To book, simply click here, fill in the form and one of our advisers will be in touch. 

The content of this article should not be taken as financial advice, or a recommendation of any financial product. These insights are based on our industry know and personal opinion. Threefold is not liable or responsible for any information, omissions, or errors present.