Inside Money: Cheap and lazy - Treasury reveals best-laid plans for auto-enrolment

KiwiSaver auto-enrolment is unofficially back on the agenda now the kickstart has been removed. Photo / Thinkstock

Newly-released Treasury documents show KiwiSaver auto-enrolment would at-best capture an extra 220,000 members above benchmark levels.

The Treasury forecasts, contained in a spew of Official Information Act (OIA) releases, predict between 45-65 per cent of auto-enrolled members - out of a possible pool of 400,000 - would opt-out of KiwiSaver schemes post-enrolment.

"The forecast models suggest that for these three scenarios, the exercise would bring between 140,000 and 220,000 additional new members (over and above those expected to join anyway) into the KiwiSaver scheme in 2016/17," the Treasury paper says.

Treasury put the cost of auto-enrolment - which at the earliest would be implemented in the 2016/17 financial year - at between $146 million to $254 million in the first hit - with declining costs, or even budget savings in subsequent years. Now, of course, with the $1,000 kickstart consigned to history, the cost of auto-enrolment for government would be virtually zero in year one and a maximum of $114 million annually thereafter (on the very optimistic assumption that the extra 220,000 auto-enrollees qualify for their yearly $521 member tax credit).

As reported previously, KiwiSaver auto-enrolment is unofficially back on the agenda now the kickstart has been removed.

But despite public musings by John Key and others, industry consultation on any auto-enrolment process has yet to begin.

And while the industry will no doubt support it, even the best-case Treasury auto-enrolment scenario is a little disappointing from the provider perspective. Based on a 220,000 member-capture, the nine default schemes stand to pick up a maximum of about 24,000 extra new members each - none of who will be bringing much to the party in year one with the $1,000 free money offer now off the table.

Treasury offers some hope, however.

"The approach taken to the enrolment exercise will impact on uptake; these forecasts are prepared on a generic basis and do not consider the possible variations in approach, and how this could affect the enrolment exercise," the paper says.

For example, Treasury's best-case 55 per cent conversion rate could be way off the mark: it could be a gross underestimation of public laziness in response to government directives.