Nadine Higgins – NZ Herald, 2 August 2026
Sole traders save half as much as employees due to scheme design
KiwiSaver has become a hot topic before November’s election, after National’s policy sparked debate about compulsion, contribution rates, and the retirement age.
But no one is talking enough about the large and growing number of New Zealanders being left behind in retirement savings: the self-employed.
KiwiSaver was designed around the payroll system and its strongest features – automatic enrolment, automatic deductions and employer contributions – assume you have an employer. About 420,000 self-employed Kiwis do not.
The difference is stark. Employees put 6.6% of their annual income into KiwiSaver (including employer contributions). Sole traders put in just 2.6%, less than half.
It’s a growing problem because the workforce is changing. Freelancers, contractors, gig workers, tradies, consultants, influencers – employment looks quite different to how it did in 2007, when KiwiSaver began. Between 2018 and 2023 censuses, the number of sole traders grew 14.4% - that is twice the rate of the total workforce.
Not only do they contribute less, but fewer contribute at all. Just 44% of people who work for themselves contribute to KiwiSaver, compared with 78% of employees, according to research from the Retirement Commission and Hnry – an accounting and tax software tool for sole traders.
They are also less likely than an employee to receive the full Government tax credit because they don’t contribute enough and are more likely to receive no Government contribution.
While some business owners might eventually sell their businesses to help fund their retirement, hundreds of thousands have no saleable assets and don’t employ anyone else – they are their business.
With contribution rates rising, the divide between employees and the self-employed will grow. National has suggested making KiwiSaver compulsory for everyone, including the self-employed, but no party has made any substantive suggestions to address the structural disadvantages they face.
It’s not solely the fact they don’t have an employer to match the minimum contribution that sets them back – although that’s part of it.
So is affordability – although that is also the case for many employees. A huge part of the two groups’ diverging retirement fortunes is baked into the design.
KiwiSaver’s most powerful feature for employees is that it does not depend on willpower or motivation. You’re automatically assigned a default one. Your contributions are automatically deducted at a pre-determined percentage, and the employer’s contribution is added without you having to do a thing. In short: it’s largely protected from the frailties of human behaviour.
Not so for the self-employed – it’s all on them. Like, all of it. They must “choose to join, choose a provider, choose an amount – in dollars, not a percentage. Set up an automatic payment and honour it in good and bad months” says Simplicity’s chief economist, Shamubeel Eaqub. They “do all that with no incentive, for people whose incomes are volatile and unpredictable. Then we condemn them for poor savings behaviour, rather than admit it’s poor policy design”.
Hnry’s experience provides a great example of how automation can make a difference.
While the average sole trader puts in 2.6% of their income into KiwiSaver, Hnry’s customers contribute 3.2%. The difference? Hnry offers an automated (albeit still optional) percentage through its platform.
Behavioural economics – and common sense – tells you that it’s harder to fail to do something that happens automatically, and it’s harder to miss something you never see.
There’s another reason Hnry’s model appears to work. It deducts a percentage, when most KiwiSaver providers require a fixed-dollar amount, which simply doesn’t work when you have lumpy income – something the average salaried worker seldom has to consider. If revenue falls or costs rise, that risk is borne by their employer.
But for the self-employed, late-paying customers, gaps between contracts, tax bills or rising costs all eat into the amount left over to pay themselves. It’s much harder to commit to fixed – especially since once that money goes into KiwiSaver, it’s locked up fairly tightly.
Is it any wonder that a group with unpredictable income, left to rely entirely on self-discipline, is falling behind?
So what could really shift the dial? The common thread running through almost every proposal is the same: stop expecting sole traders to remember to save, and instead build retirement saving into the systems they already use.
Fuller also suggests allowing sole traders to contribute a percentage of their income rather than a dollar amount, “sidecar” accounts – basically emergency funds that are more easily accessed than KiwiSaver in its entirety is – and exploring tax incentives.
The only incentive offered to contribute is the Government’s tax credit, which was further watered-down last year to a maximum of just $260.72/year.
However, Simplicity’s Eaqub argues international evidence suggests tax incentives alone aren’t enough.
The countries that achieve high participation collect retirement savings through the tax system rather than relying on people to remember.
The irony is that almost every political party’s policy to strengthen KiwiSaver – higher contribution rates, compulsory saving, larger employee contributions – would widen the gap for the self-employed unless the scheme evolved for them too.
KiwiSaver has become a great public policy success story precisely because it acknowledges human behaviour.
It assumes we’re busy, distracted and prone to putting off decisions, including ones that will benefit our future selves.
We should not ignore that crucial, proven insight when it comes to the more than 420,000 New Zealanders who don’t have a boss.
