Savings Group favours gentle push rather than a shove

The group released some 30 recommendations on how to improve savings in New Zealand. Among them: auto-enrolment of all employees aged 18 and over (or, even better, 16 or over) who are not currently in KiwiSaver, but with the ability to opt out.


Again compulsory savings has been rejected. We should be nudged into joining KiwiSaver, rather than forced, giving expression to ideas bandied in the literature of behavioural economics. Simon Kemp, professor of economics at the University of Canterbury, looked at “nudging” in talk to the Roundtable on Behavioural Economics held at The Pipitea Campus of Victoria University of Wellington year ago.

He referred to book by Richard Thaler and Cass Sunstein (2009) titled Nudge: Improving decisions about health, wealth, and happiness. The authors talk of “libertarian paternalism” which works by nudging people into sensible choices.

“Defaults” is among the important principles for achieving this. Reference is made to large US firm which changed the way it implemented its retirement plan so that new employees had to choose to opt out rather than in. Initial participation rose from around 50% to 85% enrolment. Similar findings have been found in other studies.

The results were clear-cut, Professor Kemp pointed out, even though the reasons for achieving them are not. The Savings Working Group also seems convinced. If the “opt out” rather than “opt in” option is adopted for KiwiSaver “there are good reasons to believe that savings rates will rise”, the report said.

• For full copy of the report visit

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