Despite strong public support for a 1 per cent KiwiSaver contribution increase on April 1 Financial Services Council Chief Executive Peter Neilson says the increase is not enough.

A 1 per cent KiwiSaver contribution rate will be put in place on April 1.

Peter says nearly 60 per cent of New Zealanders are supporting the Government's move this Monday to increase the minimum KiwiSaver contribution rate by 1 per cent.

'This strong cross-party support should encourage policy-makers to set up ways to increase the contribution rate by 1 per cent each year to gradually reach the 10 per cent contribution that's really needed.”

From tomorrow the minimum KiwiSaver contribution rate for both employees and employers will see an increase from 2 per cent to 3 per cent.

Results from recent polling, undertaken by Horizon Research and released by the Financial Services Council, show there is broad public support for the change.

A total of 58 per cent of New Zealand adults either strongly support or support the change, 21.8 per cent are neutral about the change and only 12 per cent oppose (including 5 per cent who strongly oppose).

However, Peter says a one-off rise of 1 percent to a 3 per cent contribution rate by employers and employees (leading to a total 6 per cent contribution to employees' accounts) will not deliver a comfortable retirement to many of the 2 million people who have joined KiwiSaver.

'We know that simply won't be the case at that savings rate.

'Our calculations show that people need to save 10 per cent of their income from the time they start working, at 25 years for example, to achieve a comfortable retirement. That percentage increases rapidly as people delay starting to save for their retirement.”

The Financial Services Council recently released the results of a Horizon Research survey showing only 9 per cent of New Zealanders believe NZ super alone will be sufficient for them to live on when they reach the age of entitlement.

In an earlier Horizon Research survey, most New Zealanders defined comfortable as a weekly living amount that is about twice that of the NZ super entitlement, which currently provides a maximum of $349 per week for an individual and $537 per week for a couple.

Peter believes the public's positive attitude towards the increase in KiwiSaver contribution rates, identified in Horizon Research's results, suggest the time may be right to give current members the option of an annual 1 per cent increase to their contribution as employees' their wages and salaries increase, until they reach 10 per cent.

From tomorrow, KiwiSavers will have the option of choosing to contribute 3, 4 or 8 per cent of their salary with a further 3 per cent from their employer.

'We need to create a pathway to a comfortable retirement for all New Zealand employees.” The country could also provide ways for new entrants into the KiwiSaver scheme to have a lower starting level of contribution of 1 per cent matched by their employer, increasing by 1 per cent per year until they get to a minimum of 6 per cent. The employee could then continue to increase their contributions until the combined total is 10 per cent.

'We need this easier starting option for those on lower incomes so they have a chance to also enjoy a KiwiSaver payout on top of New Zealand Super and have a more comfortable retirement.

'Currently only about one in every 10 KiwiSaver members is saving at a rate sufficient to fund what Kiwis regard as a comfortable retirement.”

Peter says NZ Super and KiwiSaver both have a part to play in providing employees living in New Zealand with a comfortable retirement.

'New Zealand super is the best first-tier age pension in the world but it needs to be supplemented with wider participation in KiwiSaver and a gradual lift in contribution rates into KiwiSaver as wages and salaries increase if most New Zealanders are to have a comfortable retirement.”