A 'soft compulsion' option for getting people not enrolled in KiwiSaver into the scheme would see a third of them decide to stay in at a cost of about NZ$300 million for the government, Prime Minister John Key says.
The government was currently seeking advice on auto-enrolling people in the workforce not currently in KiwiSaver, but giving them the opportunity to opt out.
The advice received so far indicated about a third would choose to stay, meaning two-thirds would opt out, he said.
“The good news part of that I think it would encourage more New Zealanders into KiwiSaver. The bad news is it costs the government upfront in the order of propably NZ$300 million. So there’s obviously a trade-off here between being able to afford that cost, and getting us back into surplus,” Key told media in Parliament Tuesday morning.
About 1.8 million New Zealanders - both in and outside the workforce - have joined KiwiSaver since its introduction four years ago. Estimates are that as many as one million people in the workforce of 2.2 million are not currently enrolled in the scheme. Full enrollment of that million people would cost the government NZ$1 billion up front, given the NZ$1,000 dollar Kickstart payment for joining the scheme.
But if only a third opted to stay in the scheme, the cost would be closer to NZ$300 million upfront - those who opt out are not able to keep their Kickstart payment.
Voluntary KiwiSaver join-up rates have sat between 18,000-25,000 over the last six months, although the rate has has been falling.
Opposition parties have put this down to the government's decision in the May 2011 Budget to cut its 'member tax credit' payments in half. See more here.
The issue of encouraging more private savings in New Zealand reared its head again last week, when ratings agencies Fitch and Standard & Poor's both downgraded New Zealand's sovereign credit rating from AA+ to AA, citing concerns about the country's overall foreign indebtedness, made up mainly of private sector debt owed by the banks.
The Labour Party is also considering policy looking at a form of compulsory savings, although whether it be soft or full compulsion remains to be seen.
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