A note on KiwiSaver and migrants on temporary visas

Abstract

New Zealand’s (NZ) current policy setting excludes migrants on work or student temporary visas from joining KiwiSaver (KS). Migrants on temporary visas, therefore, cannot access a savings vehicle that makes saving for retirement convenient and provides financial incentives to save. This research note estimates the extent of this migrant KS ineligibility issue. We use linked administrative data to create a cohort of 70,000 NZ migrants on temporary work or student visas in 2009 and follow them for ten years. Results show that after five years, over half of the cohort live overseas and about 10,000 remain on temporary visas and hence are still ineligible for KS. Using KS enrolment of a comparison group of resident-class migrants over the same time period, we estimate that just over half of employed temporary migrants might have potentially joined KS if eligible. The lost individual KS contributions range between $36,000 and $51,000 by time the migrant reaches 65 years old. Our findings contribute to the policy debate of whether the eligibility criteria of NZ’s KS scheme should be revised to allow temporary visa holders to join.

KEYWORDS:

• KiwiSaver
• temporary migrants
• retirement
• savings

Acknowledgements

We would like to thank Michelle Reyers, Suzy Morrissey and Jo Gamble for their input.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 See Question 6 in the Terms of Reference for this Review at https://retirement.govt.nz/policy-and-research/2022-review-of-retirement-income-policies/

2 Three months is equivalent to about 93 days, which we round to 100 days to create the ‘living overseas’ threshold. For robustness purposes we also try an alternative of a 120 day threshold and our results are qualitatively similar.

3 See Table 5 of Meehan, Mitchell, and Pacheco (2022) for changes in KS enrolment rate over time. It rises from 56% in 2010 for this resident-class migrant cohort to 83% by 2019.

4 Detailed information on annual earnings for this cohort is available in Table 6 of Meehan et al. (2022) and ranges from $28,186 in 2010 to $44,263 in 2013.

5 With the average retirement age set to increase in a majority of OECD countries in the near future (OECD, 2021), this will only emphasise the scale of the migrant KiwiSaver ineligibility issue as the amount of savings temporary migrants miss out on increases with retirement age.

6 Assuming that they are not on total remuneration packages, in which case, their employer would pay them the equivalent of the 3% KS employer contributions as salary.

Additional information

Funding

This work was funded by Te Ara Ahunga Ora Retirement Commission.