Many concerns existed about compulsion and the Savings Working Group had suggested putting in thresholds, such as income or age restrictions, to help ameliorate some of those, he said.
"Soft compulsion" could be another option, automatically enrolling everybody with the choice of opting out.
"Although this is just an interim report, early indications suggest the working group could be in favour of compulsory savings."
The idea of age thresholds made good sense, but income thresholds were something of a double-edged sword, Mr Foster said.
"Allowing low-income earners to opt out of KiwiSaver would be beneficial in the shorter term for those struggling to afford the contribution. But we could find ourselves in a situation where KiwiSaver was not serving those who needed it the very most."
New Zealand had already experienced a degree of "soft compulsion" under the current KiwiSaver system with the automatic enrolment of new employees, he said.
One of the difficulties with the debate about compulsory superannuation was the three-year election cycle.
The political side of the debate could not be underestimated.
Because of the election cycle, political parties were likely to say the things that would keep them in power and "compulsion" was not a good word to use in an election year, Mr Foster said.
The Government also had to consider how compulsory saving would fit with the current New Zealand Superannuation, which was funded from the tax base - a sort of compulsory saving for taxpayers.
"Workplace compulsion is a completely different animal and needs to be treated differently," Mr Foster said.
State-owned Kiwibank wants the KiwiSaver scheme to become compulsory for all New Zealanders with income above a prescribed level.
"In our view, compulsory KiwiSaver would significantly increase retirement incomes, and therefore quality of life in retirement, for many New Zealanders," Kiwibank said in a submission to the Savings Working Group.
"It would also provide a significant savings cushion, reducing dependency on government benefits and healthcare - effectively lowering the fiscal cost of retirement," Kiwibank said.
It also came out against the so-called Nordic model under which capital income was taxed at a lower rate than labour income.
"While the Nordic model is theoretically attractive, we consider it is less suitable for New Zealand," Kiwibank said.
This was because the model relied on a capital gains tax, which New Zealand did not have.
It also argued that New Zealand's portfolio investment entity (PIE) regime provided a vehicle for taxing savings at a lower rate as savers are taxed at a maximum rate of 28%, compared with the top marginal income tax rate of 33%.
"In short, a full Nordic model is likely to make the system more complex and we consider it would be difficult to apply in practice," Kiwibank said.
The Savings Working Group might wish to consider whether prescribing a minimum amount of the New Zealand super fund's capital to be invested onshore would help improve the depth and robustness of New Zealand capital markets and provide a platform for future growth, Kiwibank said.
While increasing investment potential, a larger domestic savings pool could also lower reliance on offshore funding.
Kiwibank also advocated retirement-stream products such as annuities.
From July 1, 2012, eligible KiwiSaver members would be able to make lump-sum withdrawals of their retirement savings.
The amounts involved would be significant and would increase over time.
"Retirees will face difficult decisions about how best to invest these lump sums so as to provide a reasonable standard of living during their retirement," Kiwibank said.
The risk for the Government was that retirees made poor investment choices and ended up being dependent on state benefits.
"Annuities make budgeting easier and reduce the need for ongoing management of retirement savings. A lifetime annuity can also mitigate longevity risk and provide peace of mind for retirees and their families," Kiwibank said.
