Govt urged to signal gradual KiwiSaver contribution increases

The Government is being urged to start signalling gradual increases in KiwiSaver contributions now to ensure people save enough to retire comfortably.

The number enrolled in the workplace savings scheme reached 1.93 million in April this year. Fund manager Tower Investments forecasts that will top the 2 million mark in the next four months at current rates.

The minimum employee and employer contribution to set to rise from 2% to 3% from April 2013.

Tower Investment chief executive Sam Stubbs says that is not enough to retire on - and the Government needs to act.

He says based on contribution rates globally and experience in developed market economies like New Zealand, people should be saving 9% to 12% of their salaries - and very few New Zealanders are doing that.

Mr Stubbs says the best thing any government could do would be to give a long-term signal about how contribution rates should increase over time.

He says it would be very difficult to raise contribution rates in one big step, but if the Government was to signal a series of small increases over a long period of time, it is likely employers would start to give part salary rises and part KiwiSaver contribution increases.

Mr Stubbs says over a long period of time most New Zealanders would get used to the idea and not notice it and it would increase contribution rates.

Mr Stubbs, and others like the savings lobby group, Workplace Savings New Zealand, are welcoming the Government's intention not to tinker with KiwiSaver this year.

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