Labour’s proposal to increase KiwiSaver contributions is a welcome move, the Financial Services Council says.
Under a Labour Government, all employees who are not already KiwiSaver members would be enrolled next October.
A year later, their minimum contribution, and that of their employers, would increase from the current 3% at a rate of a quarter of a percentage point every year, to a combined 9% over time.
Students, beneficiaries, self-employed people and those on very low incomes would be exempt.
The FSC said a contribution rate of 9% would be sufficient to achieve a comfortable retirement for someone who was saving for 40 years, even on the minimum wage.
Chief executive Peter Neilson said: “Starting current non KiwiSavers at only 1% and stepping up contributions by 1% a year and 0.25% a year for existing KiwiSavers addresses concerns about affordability for employees. It is useful to remember that when Australia started its journey on compulsory superannuation in 1992 their wages were about the current level in New Zealand.”
He said if members were to default into balanced or growth, rather than conservative funds, and the tax treatment of KiwiSaver was made more favourable, the contribution rate could drop below 9%.
The Government has ruled out a move to a compulsory savings system.
Finance Minister Bill English said: “Most of the people who can save effectively through KiwiSaver are already in it, and most of the people who are out of it have opted out because they are unable to save.”