Should KiwiSaver be compulsory? New Zealanders could be $114 billion better off in retirement

People not in KiwiSaver or undercontributing could be hundreds of thousands of dollars out of pocket when they retire, according to a new report.

Financial advisory business National Capital has estimated about 703,000 people are not contributing, and at a minimum contribution of 3 percent of wages, they would collectively be nearly $114 billion better off at retirement.

The firm's quarterly KiwiSaver report showed a slight decrease in the amount being contributed last year at 4.27 percent of income compared to what was regarded as the optimal level of 6.3 percent.

"The slight decrease in the KiwiSaver Contribution Index may reflect the impact of the cost of living crisis affecting New Zealanders. It suggests that many Kiwis prioritise immediate financial needs over future savings because of the pressure of rising expenses," the report's commentary said.

The highest level of missed savings was for those in the 18-24 years age group at $312,004 up to retirement at 65, with declining amounts per person in ageing demographics.

National Capital founder and director Clive Fernandes said such undersaving raised the issue of whether KiwiSaver should be compulsory.

A survey showed overall 62 percent support, but support was strongest among those aged over 60 at about 75 percent, followed by the youngest - between 18 and 27 - at 68 percent.

"It is the squeezed middle that's not so keen on KiwiSaver not being compulsory because they're the ones who have the highest expenses, they're paying their mortgages and the high cost of living and the like, and for them retirement is still a concept that is far away."

Fernandes said a national debate on compulsion should be led to the Retirement Commissioner, with the assistance of retirement experts, which would then inform the government on potential options for change.

He said people had different reasons for not contributing but overall there was a near $114b hole in missed savings, which would ensure many people a comfortable retirement.

National Capital's survey of the performance of various sectors and funds based on various measures found the Booster Socially Responsible High Growth the best performer, with Simplicity having the best growth, Booster's balanced fund the best in that category, and the now-closed Fisher Two cash fund the best conservative.