Kiwis are saving more but still unprepared for retirement

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Mercer KiwiSaver Sentiment study reveals shift in sentiment towards KiwiSaver two years since introduction.

Mercer KiwiSaver Sentiment study reveals shift in sentiment towards KiwiSaver two years since introduction.

While the introduction of KiwiSaver has seen more New Zealanders take control of funding their retirement, recent economic turmoil has heightened their uncertainty and left many feeling unprepared for retirement, a new study from Mercer has revealed.

Mercer’s KiwiSaver Sentiment Study of 513 working New Zealanders found that 44 per cent of survey respondents participate in the KiwiSaver scheme. Yet there has been a rise in the number of people who feel that life in retirement would be less comfortable than it is today: 49 per cent feel this way, up from 42 per cent in 2007, when Mercer conducted its first KiwiSaver Sentiment Study just prior to the scheme’s introduction.

The latest study, conducted in late 2009, also revealed a shift in New Zealanders’ self assessment of how prepared they were for retirement. In both 2007 and 2009, half (50%) of respondents had given, at best, some thought to retirement and had made very little, if any, preparation for their future. However, in the 2009 study there was a decline in the number who felt they had given a lot of thought to retirement and made any preparation: from 16 per cent to 9 per cent.

Martin Lewington, Head of Mercer New Zealand said, “The economic events of the last two years have provided a reality check for many New Zealanders in terms of how prepared they are for retirement. By the same token, these events along with the introduction of KiwiSaver have also prompted Kiwis to become more astute and engaged with their retirement planning.”

Although take-up of KiwiSaver has not been universal, a growing number of New Zealanders have warmed to the scheme. The study found that 44 per cent of survey respondents are members of KiwiSaver, a significant uptake, given prior to KiwiSaver’s introduction only 27 per cent participated in a workplace based superannuation scheme in 2007.

“It is encouraging to see more New Zealanders playing an active role in planning for their retirement. The rapid growth of the scheme since 2007 demonstrates New Zealanders have embraced KiwiSaver and will increasingly rely upon it in years to come,” said Mr Lewington.

When asked how beneficial they thought KiwiSaver would be to funding their retirement, 89 per cent felt it would be very or somewhat beneficial – a significant increase from the 70 per cent who thought so just prior to its introduction. Concurrently, the proportion who felt KiwiSaver would not be beneficial at all for retirement funding dropped, down from 21 per cent to 7 per cent.

“These findings are encouraging, in that for the most part the value of KiwiSaver today, and in the future is well understood among existing scheme participants. Furthermore the decline in those who think KiwiSaver would not be beneficial at all indicates messages about the importance of self-sufficiency in retirement are being heeded by working New Zealanders.”



“Mercer’s research indicates the more you understand KiwiSaver and retirement planning, the more likely you are to see the scheme as an important retirement savings option. The challenge for providers and Government now, is to increase education and understanding among those with lower levels of understanding of KiwiSaver to continue this strong rate of uptake among working New Zelanders,” said Mr Lewington.

Of those New Zealanders who have not joined KiwiSaver, one in four anticipates they will do so in the next twelve months. For those still unlikely to join a scheme, lack of affordability was the most common reason.

Other key findings of the study include:

* Kiwis are reasonably satisfied with KiwiSaver providers; nearly half (49%) said they were either satisfied or very satisfied with their current provider.

* Respondents indicated a strong loyalty to current schemes; very few (5%) anticipated a change in their KiwiSaver provider in twelve months time.

* The main concern Kiwis have about KiwiSaver is the lack of guarantee and specific concern about the future viability of the scheme. Other concerns centered on a lack of understanding of the scheme, poor returns and a preference for greater control over personal finances.

* Kiwis predict they will need between $2,000-$3,000 per month (including NZ Super and after tax) in retirement.

* The introduction of a 2% contribution level has proven popular; 29% indicated they either plan to make or already make contributions at the 2% level (the proportion of these as a result of default selection is not known), while 46% plan to do so at the 4% level.

* Just over half (55%) actively chose their own provider, while two in five (42%) either let the Inland Revenue Department or their employer make the decision on their behalf.

* Kiwis demonstrated a reasonable level of knowledge of the KiwiSaver scheme, however respondents showed uncertainty around government fee subsidies and some believed that respondents could belong to more than one KiwiSaver fund.

“Many working New Zealanders have recognised that they need to play a role in preparing for their retirement and see KiwiSaver as an essential part of this. However, in the context of a recession, it has been difficult for some people to act on that knowledge. Hopefully, as the economy recovers, we’ll see more individuals in a position to do so,” Mr Lewington said.

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