"There is no doubt some people are doing it hard and they will be thinking about their KiwiSaver contributions in that context," Gregory said.
But he said regularly contributing to KiwiSaver helped people's long-term financial well-being, especially with the aid of compound interest.
"That is how you get the benefit of KiwiSaver over the longer term."
Figures from Inland Revenue indicate the number of people contributing at higher rates is also declining.
Members can contribute at 3, 4, 6, 8 and 10 per cent. In June 2021, 74,260 people put in 10 per cent of their pay but that had fallen to 67,463 by May this year.
Those contributing 8 per cent fell from 140,882 to 109,872, while those putting in 6 per cent fell from 71,185 to 64,998.
At the same time, those putting in nothing rose from 1,483,266 to 1,862,129. The IRD contribution rate data is calculated using a member's final payday in that month and will not capture those who contribute outside of the PAYE system.
Asked how it was tackling contribution rates, Gregory said that was an area the Government was currently looking at.
"From our perspective as a regulator, one of the things we can do is try and influence the providers so that there are as few barriers as possible for people coming in right now on the basis of it being poor value or poor management."
Default fees fall
One positive was that the fees being paid by default members had fallen for the first time this year. After peaking at an average of $78 a year in 2019 they had fallen to $64.
Gregory said this was down to the change in default providers. New providers were appointed last year and members switched in December. Low fees were a key driver in who the Government appointed to manage those funds.
But average fees for active members continued to grow rising from $188 in 2019 to $245, albeit at a slower rate of growth.
"For default members, you can see the clear impact of the change in settings there with the amount of fees being taken from default members."
Gregory said there had still been an increase for active members but it was smaller than previous reports.
Part of that would be because the growth overall in funds under management had not been quite as big.
"But we are hoping that from next year, when we have got a full year's worth of value for money impact, we will start to see that trend of dollars per member benefiting from scale starting to slow down and even go backwards, which is what we have been talking about back five years ago."
KiwiSaver providers are now having to report on value for money and justify fees to the regulator and fund supervisors.
In total, fee revenue rose 6.5 per cent to $692.6m.
Members withdrew $3.8 billion over the year - with a large portion driven by over 65-year-olds taking their money out. Over-65s took out $1.95b, up from $1.22b in the prior year.
More retirees also fully exited the scheme - up 10 per cent to 21,466.
Gregory said to a certain extent that was KiwiSaver working as it was supposed to.
"That is one of the reasons it exists - to fund people's retirements. Much beyond that would be speculation.
But he said some may have withdrawn their money in a bid to avoid the volatility in the markets.
"There might have been an element of that."
First-home withdrawals were static, up 1.4 per cent to $1.44b, while financial hardship withdrawals fell 33.4 per cent to $106m - back to the level seen before last year's jump.