An extra $52 billion could be injected into the New Zealand stock market by 2066 if 80 per cent of workers were in KiwiSaver and the contribution rate was raised to a combined 10 per cent, according to research commissioned by a financial services lobby group.
Infometrics figures provided by the Financial Services Council project that $312 billion would be channelled into KiwiSaver by 2066 if no change was made to the existing regime, of which $39 billion could potentially be invested in locally listed stocks.
But if its suggested changes were made, the amount in KiwiSaver would more than double to $731 billion with $90 billion going to the local bourse and a further$3 billion potentially availablefor unlisted companies.
That would make a "considerable impact" on whether firms decide to list in New Zealand, says Peter Neilson, chief executive of the council.
"Often the ones that are going to grow rapidly and have a wide customer base are the ones that go overseas [for funding]."
It could also make the sharemarket more attractive for foreign investors, he said.
Neilson said talking to KiwiSaver members showed the retirement savings scheme was already making a difference to the way they invested with more putting money into growth companies.
"Before KiwiSaver most of that money would have gone into highly liquid stocks."
Knowing the money was locked in people's accounts until they turned 65 allowed investment managers to take a longer-term view, he said.
"These are the companies with the biggest potential, they were the ones that frequently had to sell themselves to somebody else in order to be able to grow."
The council wants all workers including the self-employed to start contributing to KiwiSaver from 2015, starting at 1 per cent a year and increasing by a percentage point a year to 10 per cent by 2024. Those who are already in KiwiSaver would also increase their contributions from 2024 from a combined 6 per cent a year to 10 per cent.
At present employees have to contribute a minimum of 2 per cent and employers a further 2 per cent. From April that will go up to 3 per cent each to a combined total of 6 per cent.
Last year the Government deferred a proposal to automatically enrol all workers who are not already in KiwiSaver until after 2014/15 because of the added cost.
The proposal would have cost the taxpayer an extra $514 million over four years to bring in.
Neilson said the added expense could be overcome by the incentives being dropped if the scheme became compulsory for workers. 'If you make it compulsory, do you need to keep the incentives?"
The Government now puts in $1000 when people sign up to KiwiSaver and contributes 50c for every dollar saved up to $1043 a year.
Neilson said the Infometrics research was prompted by a desire to look at the business case for KiwiSaver and what difference it could make to the potential size and benefits of the savings pool.
The council picked 2066 because the forecasting model used Census data and because it took into account the full retirement savings period for a graduate.
"People who are teenagers today will be retiring around then."
Around two million people are already in KiwiSaver but only 55 per cent are considered to be actively contributing to the scheme.
*The Financial Services Council wants 80 per cent of workers to be in KiwiSaver.
*New members to join by 2015 at 1 per cent, rising one percentage point a year to 10 per cent by 2024.
*Existing members to increase combined contribution from 6 to 10 per cent from 2020 to 2024.