Retirement income: “They have to do something”

The idea of introducing compulsory retirement saving is generally well received among employees on below-average incomes, according to qualitative research conducted through the HorizonPoll panel.

Horizon Research recruited 33 people for one-on-one interviews which were conducted by Tasman Research in June 2013. The client was the Financial Services Council (FSC).

We wanted to talk to two main groups of people:

• Employees on below-average incomes, who found it hard to save, were not enrolled with KiwiSaver but weren't strongly opposed to the idea of a compulsory savings scheme, and

• Employers who said their business was finding it "tight" at the moment, and weren't strongly opposed to the idea of a compulsory savings scheme

The full research project report is available at the FSC web site, where the research is presented along with results of other studies on options to cut taxes on savings and double retirement incomes, while keeping New Zealand Super.

Tasman’s report concludes that, while some have various objections to compulsory KiwiSaver (or Universal Savings Plan – USP), nothing is insurmountable.

It says a more palatable USP would include:

• An optional "rainy day account" (paid for via insurance) that people could use under more liberal conditions than KiwiSaver. For example redundancy or recovering from surgery - something KiwiSaver does not currently cover

• A capital guarantee (by the government - not a private insurer - paid for via insurance or something similar to the recent RDGS)

• Choice around when someone retires, rather than focusing on 65. A significant proportion of people expect to work past 65

• Splitting contributions to the USP between partners (or possibly creating matrimonial accounts). People generally recognise this as fair, and it removes some of the reason for "top-ups"

• No need for top-ups of individual savings accounts, as everyone would be making some contribution - even those on a government benefit.

Tasman’s report says communicating the USP should focus on the above features, as well as:

• This is what other countries have done, concentrating especially on Australia and its example

• No money has been lost by any KiwiSaver providers

• Saving is hard, but help is available. (Stay away from the "you must save!" sentiment - be positive not negative)

• The changes in the working-age-to-retired ratio means something must happen. Not burdening future generations is probably a powerful argument

• Ten year phase in, 5% / 5% split and - for employers - that it's future wage increases that will pay for this

• Use of the funds for education.

For an opportunity to have your say on major issues and also volunteer, if asked, to take part in personal interviews, please join the HorizonPoll adult panel here.

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