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Jonathan Parsons, of Spratt Financial, Ali Bazzaz, of One50 Group, Joseph Darby, of Milestone Direct and Clive Fernandes of National Capital are lending their support to a Victoria University report as part of a submission to the Retirement Commissioner’s 2019 review of retirement Income Policies.
They want to make it easier to implement economist Richard Thaler’s Save More Tomorrow (SMarT) plan.
It works by getting people to commit to using their future pay rises to increase their retirement savings contributions. Contributions rise each year until they reach a pre-determined maximum savings rate.
The usefulness of this approach is also being considered in Massey University research.
The report asks the Government to make changes to the KiwiSaver KS2 form to allow employees to indicate how much they want their contributions to increase each year, and to what maximum. It also asks the Government to research how the plan would work in a New Zealand context by running a trial in the public sector.
The researchers noted in their report that at the moment, employees should be able to commit to future savings increases but it would require extra administrative effort.
Fernandes said the SMarT plan had been estimated to increase annual savings in the United States by US$7.4 billion ($11.6 billion).
He said New Zealand was a few years behind some of the rest of the world in implementing behavioural finance techniques. “We will get there, it’s just a question of when. I think it would make a huge difference to KiwiSaver.”
He said it was important that employers, who would have a significant role to play in implementing the system, could see that it would benefit their employees.
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