Workers should start saving 10 per cent of their incomes when the economy improves, to lower the future cost of New Zealand Super without the need for means-testing, says a proposal from the savings and insurance industry.

But the plan, if implemented, could see retirement ages as high as 75 years.

Prepared by the Financial Services Council, the proposal questions the long-term costs of NZ Super, arguing that official Treasury projections – and individual savers – are probably underestimating how long people are going to live.

The council's members include many of the biggest KiwiSaver providers, as well as other banks and insurers with an interest in boosting savings.

Perhaps realising that people might baulk at more saving, the proposal suggests that KiwiSavers could be allowed to withdraw some of the money early to start a business, buy a farm, or pay for tertiary education. Savers can already withdraw money to buy a first home.

Under the plan, workers would be automatically enrolled in KiwiSaver, with an option to leave for financial hardship. It is supported by former National prime minister Dame Jenny Shipley, the chair of the council.

But the plan has more in common with Labour's proposal to boost KiwiSaver contributions, make savings compulsory for workers and gradually raising the age of eligibility, than with National's view that no change is yet needed. A government proposal to automatically enrol all workers in KiwiSaver was shelved when the country's projected return to surplus became too tight.

The proposed scheme would be called KiwiSaver Plus and people would be able to use the money to buy private pensions before they become eligible for super.

Retirement Commissioner Diana Crossan says it would put a strain on households that struggle to save by increasing the reliance on private nest eggs.

"I have a lot of worries about forcing people to save in New Zealand because wages are so low," she said.

The plan assumes the age of eligibility would rise in tandem with longer life expectancies, possibly reaching 75 later this century, a projection that is questioned by the country's official demographers.

Auckland University retirement policy researcher Michael Littlewood says it would be better to give people a choice about where to put their money, so they could pay off debt, or pour it all into a business.

He criticised the Government for not joining pension discussions, saying it was unfair on savers not to know what was coming. Crossan said it was good that groups like the Financial Services Council were raising awareness that the pension might not always be available at 65.

"People talking about it has done part of what was needed. Only [Prime Minister] John Key can do the other part," she said.

- © Fairfax NZ News