The UK's Pensions Policy Institute (PPI) has warned that insufficient reform of the state pension system could threaten the success of the proposed national pensions savings scheme (NPSS), or 'BritSaver' as the scheme has also been termed.

A ‘BritSaver’ learning the lessons from New Zealand’s KiwiSaver could be a more appealing and less risky proposal than the NPSS. Auto-enrolment into a low-cost savings scheme is widely supported, says Alison O’Connell, director of the PPI. But it is untested on a national scale, so we should tread carefully.

The only other country to be planning such a scheme is New Zealand which has a high universal state pension and only around 5% of pensioners means-tested for their basic income. That raises alarm bells for the NPSS in the UK as, even after the Pensions Commission’s proposals have worked through, eligibility for the pension credit would remain at around 45% of pensioners.

The PPI believes that this adds to the need for government to consider bolder state pension reform that would reduce the scope of means-testing from its current level – not just contain its future growth. Other feasible models of state pension reform in the UK could reduce eligibility for pension credits to around 10%, which would help take the pressure off the NPSS.

KiwiSaver has some product design and implementation features that may be welcomed here for a more flexible ‘BritSaver’ than the NPSS. For example, annuitization is not compulsory in KiwiSaver. It comes with support for buying a first home and a package of help for making financial decisions. It is promoted in language about helping people to build up discretionary savings, not about ‘we all have to save for a pension’, Ms O’Connell adds.

KiwiSaver is being introduced using existing processes rather than a big new system build. It is lower risk than the all-new NPSS.