And many employers aren't contributing. When we surveyed 500 recently, only 56 per cent said that they topped up their employees' contributions with another 3 per cent. Shockingly, another 20 per cent didn't know.
The small employers that do contribute are the best. "Our staff are really important to our business and we're big supporters of KiwiSaver," says Rob Pavan of Modern Homes in Wellington. "We think it's a great way for staff to plan for their future."
Their squad of six builders are all in KiwiSaver, with just one on a break at the moment. Those contributing receive 3 per cent on top of their wages.
Biting the hand that feeds?
A financial adviser I know often hears this from his clients: employees don't want to "put out" their employer by effectively forcing them to give them a raise via KiwiSaver contributions. "I don't want to do that to them," workers say.
It's a classic case of not biting the hand that feeds you. At least that's how it feels to an employee.
But how do things look from an employer's standpoint? Understandably, their 3 per cent contribution to workers' KiwiSaver funds is an added expense to be contained.
"Our contributions form part of the package that we offer employees," Pavan says. "It's an additional cost for businesses each month, and depending on number staff, turnover, etc, it may be hard to find that extra money, so I see why some choose the alternative. It's always been part of the package for us."
Doing the right thing
I'll just come out and say it: there is really no incentive financially for an employer to encourage their employees to join KiwiSaver or contribute.
At the moment all the system can do is encourage them to do the right thing for their workers who have not joined or don't contribute.
KiwiSaver is an employee benefit like many others, but some employers would just as soon pony up for a free trip or extra gifts at Christmas for employees instead of topping up year round. When there are thousands of dollars at stake, it's easy to see why money is not flowing into KiwiSaver.
Then there are employers – around 10 per cent – who do not top up the 3 per cent, but instead take it out of their employee's salary or wages. So the employees are effectively contributing it themselves.
And when given the choice, some employees would prefer the boss not to do this so they could have the money on payday rather than it going to KiwiSaver. Money now trumps money later every time.
Nothing in, nothing out
Unfortunately, this pickle is part of the reason why so many are not building any long-term savings despite us having KiwiSaver here in New Zealand. It's a shame to see it not working as well as it could.
Now if all the nannies were in KiwiSaver and decided to contribute at the same time, that would level the playing field between them. Employers would have to top-up, and there would be no fear of being passed over for others with a lower hourly rate.
Nannies wouldn't miss out on their long-term financial growth through KiwiSaver, and a more secure future. Their work is hard enough looking after all those babies.
- Get Sorted is written by Sorted's resident blogger, Tom Hartmann (@TomHartmannNZ). Check out the guides and tools from Sorted – brought to you by the Commission for Financial Capability – at sorted.org.nz.