KiwiSaver auto-enrolment could be costly and time-consuming for default providers of the savings scheme and frustrating for workers, says the chairman of a superannuation industry body.
Finance Minister Bill English announced yesterday that the Government would proceed with enrolling all working-age New Zealanders in the scheme - with the option to opt out - in 2014/15, provided the country returns to surplus by that time.
Auto-enrolment is already in place for workers starting new jobs.
The concept the Government is mooting would mop up the pool of employees who have not changed jobs since KiwiSaver was introduced, and have not joined the scheme.
Workplace Savings chairman David Ireland said auto-enrolment would also affect workers who had already opted out of the scheme, and would be forced to opt-out again.
"The risk is that the primary beneficiaries of the process will be the print industry, with all the documentation that needs to go to people, as opposed to boosting the overall uptake for the scheme," he said.
Ireland said the introduction of auto-enrolment would have to be clearly communicated to workers so there were no surprises.
"What is really important over the next little while, if the Government's committed to this course of action, is good constructive engagement with both the providers and employer representatives."
Ireland said the changes would only have a direct impact on the six KiwiSaver default providers - Axa, AMP, Tower, ASB, One Path and Mercer - that workers would be auto-enrolled into.
"Inevitably when someone opts out there are costs," said Martin Lewington, head of Mercer. "But the Mercer administration platform is very efficient ... we'd manage."
He was supportive of the move towards auto-enrolment.
"The broader the [KiwiSaver] coverage the better," said Lewington.
Tower Investments chief executive Sam Stubbs said he supported the move towards "soft compulsion", but there also needed to be a debate around raising contributions to the scheme.
"This is a positive step forward, no question," he said. "But the debate needs to move on to how we achieve slow but steady increases in contributions so that New Zealand becomes not only resource rich but also capital rich."
Milford Asset Management managing director Anthony Quirk said yesterday's announcement was positive, as there were a lot of people in the workforce who had "no good reason" not to be signed up to the scheme.
The announcement appeared to be a move towards compulsory superannuation, but to go the whole hog a change of Government, or at least a different Finance Minister under National, would be required, he said.
"My sense is that they [the Government] have a philosophical problem with compulsion and this is probably the furthest they will move towards it," he said.
* Will be introduced in 2014/15 if New Zealand has returned to surplus by that time.
* Officials estimate that, depending on its uptake and design, auto-enrolment will cost the country up to $550 million over four years, including the $1000 kick-start payments and ongoing annual member tax credits.
* Details of the auto-enrolment framework will be finalised next year, after the Government considers submissions on a public discussion paper to be issued in early 2012.
* The Government says the introduction of a compulsory savings regime is not warranted.