A personal finance columnist for the NZ Herald

Inside Money: Softly, slowly - a conservative KiwiSaver option

Soft compulsion - so long as it doesn't get too hard in the next few years. Photo / Thinkstock
Soft compulsion - so long as it doesn't get too hard in the next few years. Photo / Thinkstock

As per its soft-announcement in this year's Budget, the National government has given another soft-assurance it would go ahead with soft-compulsion for KiwiSaver, assuming it doesn't all get too hard in the next few years.

In the press release confirming his previously-released position, Finance Minister Bill English, said the government had loose plans to launch a KiwiSaver auto-enrolment blitz in the 2014/15 season with the proviso that "we need to be mindful of the fiscal costs of all programmes".

"So we will proceed with KiwiSaver auto-enrolment in the same fiscal year in which we return to surplus and start to repay debt," English said in the release.

National guesses a general auto-enrolment of employed non-KiwiSavers would capture a maximum 275,000 new scheme members at a cost to the taxpayer of $550 million over four years.

Those are actually quite low estimates, based on only 55 per cent of those forcibly enrolled into KiwiSaver staying with the program - employees will remain free to opt-out under National's soft-compulsion plan. (The 275,000 figure also appears on the downside compared to earlier estimates that about 1 million workers could be auto-enrolled.)

My guess is that a higher percentage of auto-enrolees would stay in KiwiSaver once they've been signed up - mostly out of ignorance or 'what the hell' resignation.

English made much of the fiscal angle for not committing to start the new soft policy until at least 2014 but there was a hint of another reason buried in the press release.

The proposed auto-enrolathon launch would also "align with the 2014 re-tendering of KiwiSaver default providers".

That's an interesting little aside, strongly suggesting the government has plans for rejigging the default system - perhaps along the lines of a blog I prepared earlier.

Look forward to more auto-enrolment details in a consultation document next year (assuming National wins a soft election) where submissions "on minimising administrative and compliance costs for employers and the Government" will be particularly welcome.

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A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. He is the editor of industry website Investment News. David has edited magazines and websites for the financial advice, investment and superannuation industries.

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