Default super and the backstop society

The process would be repeated each year until the target was reached.

As "default salary sacrifice contributions" rose, employees would receive written explanation of:

• what had happened;
• why (in the absence of financial analysis of the employee’s individual circumstances) the target rate of savings seems prudent;
• how to opt out; and
• how to opt up - increasing saving faster than the default rate of increase.

The latter course could involve immediate further increases and or setting aside some additional proportion of future wage rises. Those responding to such approaches in the US have increased their savings rates from 4 to 12 per cent over 28 months.

Time was when we led the world in economic reform. We’ve barely begun discussing "default super". Meanwhile it’s become government policy in New Zealand - though their need is admittedly greater in the absence of any compulsory savings.

Announced in this May's budget, "KiwiSaver" requires employers to divert 4 per cent of wages into super with employees free to opt-out or opt-up. Participants benefit from a modest $1,000 government contribution followed by first home ownership assistance.

The National Party plans to abolish KiwiSaver to fund tax cuts. But KiwiSaver has won international acclaim and will no doubt be emulated elsewhere.

And it need not wait for government endorsement or enforcement. Many employers would do it of their own accord if they appreciated how much good it could do their employees - all for the cost of rejigging the administration of existing super payments.

Unions (and fund managers) could serve their members by helping persuade employers not to procrastinate.

Paraphrasing Churchill, rarely before in the field of collective decision making has so much improvement been offered with so little coercion or risk of harm.