Britain studies KiwiSaver scheme
By KRIS HALL - The Dominion Post | Saturday, 12 July 2008
KiwiSaver has been subjected to a rigorous examination by retirement specialists in Britain to see if lessons can be learned before a new scheme is rolled out to Britons.
In a move similar to that taken by the New Zealand Government with KiwiSaver, from 2012 British workers not already in occupational pension schemes will be enrolled into "personal accounts" unless they opt out.
A key concern in Britain, however, has been that personal accounts would compete with existing retirement provisions. Since KiwiSaver was introduced in New Zealand a year ago, there has been little evidence of this happening.
According to the British Pension Policy Institute, or PPI, this was due in the main to a feature of the KiwiSaver system that allowed existing employer-run schemes to be converted to a compliant plan.
Britain, so far, has failed to pass legislation to permit such a change.
KiwiSaver is the world's first voluntary national retirement saving scheme that uses automatic enrolment. About two-thirds of those who auto-enrolled have remained in it.
PPI director Niki Cleal said though there were lessons to be learned because of the similarities between the two schemes, different risks must be taken into account, such as existing contribution levels and scheme conversion options.
If one-third of people auto- enrolled in British pensions were to opt out in 2012, as seen in New Zealand, that would equate to about 7 million new work-based pension savers, she said.
"However, some of the key risks associated with introducing auto- enrolment into pensions saving in Britain do not apply to the same extent in New Zealand, such as the interaction with means-tested benefits and the risk of employers levelling-down existing pensions."
The British Government sees the personal accounts system as a retirement safety net for about 11 million workers who are not signed-up to employer-funded schemes.
In New Zealand, however, the Government is keen to boost household saving levels for macroeconomic reasons.
In particular, the Government is concerned that Kiwis have too little invested in financial markets, are over-dependent on property, and that New Zealand capital markets are under-developed.
Last month, a report from the Think Tank for Action on Social Change in Ireland called on the Irish Government to adopt policies based on the New Zealand system.
This would include a social insurance pension and reduced tax incentives for private pensions.
Gerry Hughes, of Dublin's Trinity College, said the cost of Irish public pensions and tax breaks for private pensions were the same as in New Zealand.
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