KiwiSaver architect Sir Michael Cullen says the scheme should be made compulsory to prevent widening inequality at retirement.

But Finance Minister Steven Joyce says the Government won't be forcing people to sign up to the scheme because it believes individuals should choose what to do with their own money.

KiwiSaver has attracted 2.75 million members since launching 10 years ago today. But more than 500,000 Kiwis aged 18 to 64 remain outside of the scheme.

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Sir Michael, who never joined KiwiSaver himself, said while some of those people would not need to be in KiwiSaver because they had property investments or were in other superannuation schemes, many would be low income earners.

"It does worry me that quite a lot of people in that group will be on relatively low incomes.

"So if they are not in KiwiSaver and those a bit above them in the income scale are, then the gap between those groups are going to widen when people come to retire."

Sir Michael said auto-enrolment should be rolled out and on balance he would make the scheme compulsory.

"It is not a drop dead no brainer issue, there are arguments both ways. But I think there is a lot to be said about moving to compulsion."

Australia's superannuation scheme is compulsory but in New Zealand people can opt-out of KiwiSaver if they don't want to be in it.

But Joyce said KiwiSaver could not be viewed in isolation and had to be coupled with New Zealand Superannuation.

"It provides a reasonable level of income for over 65s."

Joyce said the fact that NZ Super was universal - it is paid to all who qualify regardless of their assets - and allowed people to continue to work addressed those equity concerns.

The government talked of a one-off auto-enrolment in 2014 but put it on hold for affordability reasons.

Joyce said it was not planning to introduce it at the moment and pointed to an August 2015 Treasury report which found auto-enrolment would only increase membership by a small amount.

Joyce said 75 per cent of working age New Zealanders were already in KiwiSaver.

He said it was not up to the Government to force people to save for their retirement because individuals may have better uses for their money.

KiwiSaver architect Sir Michael Cullen says the retirement savings scheme should be made compulsory. Photo/Doug Sherring.
KiwiSaver architect Sir Michael Cullen says the retirement savings scheme should be made compulsory. Photo/Doug Sherring.

"I'm not a fan of removing that ability for people to choose and decide for themselves."

Joyce said people who were not saving in KiwiSaver may have decided they want to do other things with their available funds, such as investing in their own business or paying down mortgage debt.

"One of the benefits of KiwiSaver, of your money being locked in until retirement, is also one of the reasons some people make other choices."

Labour finance spokesman Grant Robertson said it would be making an announcement regarding its KiwiSaver policy within the next few weeks.

But its policy in the lead-up to the 2014 election was to make KiwiSaver compulsory for all working New Zealanders.

Robertson said he wanted to maximise the number of people in the scheme.

"For me personally I support the idea of every working New Zealander being in KiwiSaver."

But he said the challenge was that many of those people outside of KiwiSaver were on low incomes and would see joining the scheme as reducing their disposable income.

Robertson said that meant a pathway needed to be created to bring in compulsion in conjunction with wage increases.

"There is a whole set of things we need to do to see wages lift."

"I think even Sir Michael would agree it is not a matter of clicking your fingers and doing compulsion tomorrow."

Sir Michael said the reason he did not join KiwiSaver was because he was too old and had a good income through being in the parliamentary superannuation scheme.

"It was not designed for people like me," he said.

Meanwhile consumer advocates say KiwiSaver fees need to come down now that the industry is gaining scale.

Last year $325.9 million was paid to providers - an average of $125 for every man, woman and child signed up to the retirement savings scheme.

Providers say fees have come down already but KiwiSaver remains in its infancy which makes it difficult to compare fees with other countries.