Jane Wrightson conducted a comprehensive analysis on how KiwiSaver settings were currently working and made 15 recommendations.
"KiwiSaver balances across all the age groups are lower than we would have expected after almost 18 years of the scheme, and we need to improve this," she said.
"The reality is we all need to be saving more for our retirement but know that it's particularly challenging against the current backdrop of high inflation and cost of living challenges."
One of the main changes Wrightson said she would like to see is a higher default contribution rate of at least 4%, with employers required to match that level or higher.
The current default rate is 3%.
"We know that default rates are "sticky", meaning people tend to stay with them." Wrightson said.
Other changes posed by the Commissioner included increasing the government contribution for those who do not benefit from employer matching, such as self-employed workers; making employer contributions mandatory for workers aged over 65 and under 18; removing total remuneration approaches; and extending government contributions to those on paid parental leave to include those who cannot continue to make their own contributions.
But the Commissioner's KiwiSaver Opportunities for Improvement paper also suggested retaining many of the scheme's current settings.
"Making KiwiSaver compulsory is one that comes up frequently in discussions, but when you consider the evidence, we already have high membership," Wrightson said.
"Those not contributing are most likely not in paid work, on low incomes, or self-employed.
"We believe the existing soft compulsion setting of auto-enrolment with opt out, and the ability to opt-in directly is working. However, improvements could be made to incentivise the self-employed to contribute to the scheme."
She also said the pre-65 withdrawal settings were working as intended, with their relatively high bar.
The paper said over the past 12 years, a total of $8.3 billion has been withdrawn for first home purchases - a small portion of funds under management with an average of 1.2% of total funds withdrawn each year.
Only 1% of members on average had withdrawn funds for first home deposits each year.
The number of people withdrawing funds for financial hardship also represented a very small proportion of KiwiSaver members - an average of less than 0.5% each year.
Wrightson said while KiwiSaver had been instrumental in promoting retirement savings across New Zealand, it was time to look at it again.
"By implementing changes, we can ensure that KiwiSaver continues to serve New Zealanders well into the future, providing a safety net that adapts to the changing tides of work and life."
Her analysis used data from the Inland Revenue, Financial Markets Authority and the Retirement Commission's own research.
Key recommendations
• Changing the KiwiSaver settings to make it compulsory is not necessary.
• Introduce a higher default contribution rate of at least 4 percent (with employer matching at this level), retaining the 3 percent contribution rate as the minimum.
• Retain existing settings limiting membership to one KiwiSaver provider.
• Increase the government contribution for those who do not benefit from employer matching (eg. self-employed).
• Employer contributions should be required for over 65s and under 18s.
• Remove total remuneration approaches.
• Extend government contributions to those on paid parental leave to include those who cannot continue to make their own contributions.
