What would happen if people could choose automatically increasing KiwiSaver contributions?

Abstract

In this paper, we study a scheme that would make increasing KiwiSaver contributions easier. This scheme would give people the option to automatically increase their contributions each year until a maximum contribution rate is reached. We study the effect of offering this scheme with a survey experiment in which respondents are asked to fill in KiwiSaver deduction forms with and without the possibility of joining the scheme. We find that 29% of respondents would choose to join the scheme if offered. Offering the scheme has no detectable impact on current contribution rates and can substantially increase future contribution rates.

KEYWORDS:

• Retirement savings
• KiwiSaver
• behavioural economics

Acknowledgements

We would like to thank the Commission for Financial Capability for including our experiment in their survey and sharing their data with us and Clive Fernandez, Celestyna Galicki, and Suzy Morrissey for helpful comments

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 In contrast, an earlier paper that estimates life cycle models finds that most New Zealanders between the ages of 45 and 64 do save enough for retirement (Le, Scobie, & Gibson, 2009).

2 Here is the exact wording of the introductory text: ‘The next question has been included in this survey by Victoria University of Wellington (VUW) researchers. These researchers will have access to the answers of this question and some anonymous demographic information. You are not required to answer this question. If you have any queries about the information VUW has included in this survey, please contact; [email protected]. On the next page, please fill in a modified version of the KiwiSaver application form as you would if you were signing up to KiwiSaver today. (Note: this is not an actual KiwiSaver application)’ This text was identical for the treatment and control group.