Kiwisaver has amassed three times as many members as expected in its first seven years, but it has plenty of challenges ahead.
The savings scheme, launched in 2007 by then finance minister Sir Michael Cullen, celebrates its seventh birthday on Tuesday, boasting more than 2.3 million members, 240 per cent more than Treasury's early forecast of 700,000.
It's the fastest-growing segment of New Zealand's managed funds industry, having increased by almost 75 per cent in the two years to March, from $12.5 billion to $21b.
The "generous" nature of the scheme is one of the secrets to its early success, says managed fund researcher Chris Douglas of Morningstar.
This generosity includes a taxpayer-funded $1000 "kickstart" for new members and member tax credits of up to $521 per year (which this Government cut from $1042), while employees also get an employer contribution worth 3 per cent of their salary.
These sweeteners have made KiwiSaver an expensive exercise for taxpayers, costing $5.3b in government contributions in the five years to June 30 last year.
However, taxpayer subsidies have reduced from more than 40 per cent of total contributions in the first three years of the scheme to 22 per cent ($677m) in the year to June 30, 2013.
Another lure is the option for members to withdraw some of their money to buy a first home, with the Government offering first-homebuyer subsidies of up to $5000 to help pay for a deposit.
This is what attracted 32-year-old poultry plant worker Matthew Dunn, who used KiwiSaver to help buy a home in the Christchurch suburb of Hornby.
"KiwiSaver got us there and now that we've got the house I'll keep the KiwiSaver going for my retirement. It's nice to have that wee nest egg," said Dunn.
Anthony Quirk, managing director of Milford Asset Management, said KiwiSaver had become part of the New Zealand "psyche" and its stability was one of the reasons for its popularity.
"It's a long-term savings vehicle and shouldn't be tinkered with for short-term reasons."
One big debate about the scheme is whether it should be made compulsory for employees, which Labour has promised to do if it is elected. National isn't advocating compulsion but is planning to introduce auto-enrolment where people would have to opt out.
Michael Littlewood, co-director of Auckland University's retirement policy research centre, said it was "arrogant" to advocate forcing people to save.
He said the experience in Australia, which has had compulsory savings for more than 20 years, was that people retired earlier and with more debt.
Australia also had a much smaller proportion of household wealth tied up in businesses, Littlewood said.
"If I were backing New Zealand Inc I'd prefer to put money in an environment where Kiwis are making their own business decisions rather than giving money to AMP, ANZ or ASB."
But Peter Neilson, chief executive of managed funds lobby group the Financial Services Council, said making KiwiSaver compulsory wouldn't be a huge issue.
"Our research suggests about 20 per cent or more of the people not in KiwiSaver didn't have any objections to being in it, they just weren't in it," he said.
John Body, managing director of ANZ's wealth business, said improving investor knowledge and getting appropriate financial advice for members should be the priority.
"The real discussion is we've got 2.3 million people in a retirement savings solution, now how do we get 2.3 million people to know how much they need to contribute and what type of fund they should be in?"
- Sunday Star Times