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KiwiSaver - Good For Your Life by Andre Stokes
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KiwiSaver - Good For Your Life |
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Finance & Investment
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KiwiSaver is the world's first national auto-enrolment savings scheme. Both schemes plan to increase the number of people saving for retirement, and they share many design features. However, there are significant differences in the way the schemes are delivered, with implications for the levels of choice, risk and cost for savers and government. The New Zealand’s personal accounts scheme, sizeable though it is, is only part of a complicated confidential savings landscape, whereas KiwiSaver is fast becoming the main vehicle for retirement savings in New Zealand. It offers a working model for countries seeking to make a simple and unified national scheme for lifetime saving. KiwiSaver contains several inventive features, the main one being auto-enrolment, sometimes called “soft compulsion”. Workers are enrolled automatically into saving and can choose to opt out if they desire, but if they stay in the scheme the employer is compelled to contribute. This paper compares these two schemes. It begins with a discussion of the important points of policy context in both countries. It then explains the differences between KiwiSaver and auto-enrolment strategy in the New Zealand, in terms of the areas of the markets the schemes wrap, and the delivery model used or planned. Next it discusses the policy choices made in each case on the emerging important dimensions: level of investment and provider choice for the saver and levels of risk and cost for both government and saver. The two schemes have taken different positions on these aspects. This paper argues that KiwiSaver encourages more choice and is less risky, although the jury is out on whether it is of higher cost. Finally, the paper concludes whether KiwiSaver would be a good model for other countries. The New Zealand models allow everyone to make some choices, although access to schemes is more limited in New Zealand. Both models also enable people not to make a choice, by having defaults. To know more please click on KiwiSaver
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