Institute of Financial Advisers surveys finds 57% support making KiwiSaver compulsory, but doubts remain about future tampering

Institute of Financial Advisers surveys finds 57% support making KiwiSaver compulsory, but doubts remain about future tampering

By Amanda Morrall

A survey gauging New Zealanders' views about KiwiSaver found 57% believe membership should be compulsory, but many worry about future restructuring of the scheme.

The Financial Services Institute of Australasia (Finsia) study, done in conjunction with the Institute of Financial Advisers, found that lingering concerns about whether KiwiSaver would be subject to further tampering was a key reason many choose to stay out of it. That and the belief that savings outside of KiwiSaver would be sufficient to see them through retirement.

On the question of whether KiwiSaver should be made compulsory,  27% of total respondents felt it should be for all New Zealanders aged 18 and over;  and 16% of respondents suggested it should be compulsory for all employed and self-employed New Zealanders.

See our earlier article looking at the pros and cons of compulsory savings.

See also the interview above with David Beattie, head of investment and co-chair for Grosvenor Financial Services.

FINSIA CEO Russell Thomas said the research findings provided "an important and timely contribution to the debate about automatic enrolment into the KiwiSaver scheme, recently foreshadowed by the Prime Minister John Key.”

See Alex Tarrant's article on John Key's comments. Alex broke this story from Parliament.

Thomas said the sentiment of concern about further rule changing or the Government withdrawal of support, showed "the importance of forging strong and sustained bipartisan support of the scheme'' it it was to gain higher uptake.

The survey found that 54% of New Zealanders believe that KiwiSaver has been weakened as a result of changes introduced by National as part of the 2011 budget.

Those changes, which include a halving of member tax credits by Government and the taxation of employer contributions, are dependent on National's re-election.

Thomas suggested New Zealanders, on the basis of a 57% support rate for compulsion "demonstrate an appetite and willingness for the proposed reforms foreshadowed by Prime John Key in the budget."

And yet those were who were not already KiwiSaver members said concerns about government rule changing and Government withdrawing its support were chief reasons for staying out of the scheme.

Thomas said New Zealand's fast aging population was creating a number of policy challenge that needed to be addressed.

“An aging population creates a number of public policy challenges. With projections that one in five New Zealanders will be aged 65 or over by 2031, KiwiSaver is critical to improving the retirement incomes of New Zealanders.''

With doubts over the long-term sustainability of New Zealand Super, and also increased life expectancy, there are growing concerns about how New Zealanders will fare in old age given that their years in retirement could be outnumbered their time in paid employment.

Institute of Financial Advisers CEO Peter Lee said being in the correct type of fund was all the more apparent.

The study found that nearly a a quarter of respondents are in the six default funds offered by default providers, which by design are very conservatively invested. (For more on providers and how one is allocated to them, see Inland Revenue's KiwiSaver website).

The following are default providers with links to their respective default funds.

AMP Services NZ Ltd

ASB Group Investments Limited

AXA New Zealand (National Mutual Corporate Superannuation  Services Limited)

 OnePath (NZ) Limited

Mercer (NZ) Limited

Tower Employee Benefits Limited

“While this could be fine for some people, it’s likely many will be in the wrong fund and missing out on a bigger pool of money in retirement. This means many people aren’t making the right decisions, or getting good advice on what to do.”

Overall, Thomas said the study showed there was robust acknowledgement in the community that saving for retirement is vital.

Beyond KiwiSaver, more than half of New Zealanders have other investments and savings plans to prepare for retirement.

UMR Research conducted 1000 online interviews1 between 28 June–10 July on behalf of FINSIA and the IFA for this project. Dr Claire Matthews of Massey University was commissioned to analyse the data and report on the research results.

Here's the survey highlights:

Should KiwiSaver be compulsory?
57% of respondents believe that KiwiSaver enrolment should be compulsory.

27% of total respondents to this question believe that KiwiSaver should be compulsory for all New Zealanders aged 18 and over.

16% of respondents believe KiwiSaver should be compulsory for all employed and self-employed New Zealanders.

Reasons for joining KiwiSaver

51% of respondents said that the primary reason for joining was the importance of saving for retirement.

28% joined to get the government incentives.

 9% said that they had to — they had started a new job.

4% said that they had done so on the advice of their financial adviser.

A further 4% said that they had joined on the recommendation of their family and/or friends.


Significantly, over half of New Zealanders aged 18–65 are KiwiSaver members andmore than half of these people were not saving for their retirement prior to joining KiwiSaver.

43% of those surveyed have been KiwiSaver members for more than three years

22% for more than two but less than three years and 21% more than 12 months but under two years.

7% have been members for more than six months but not more than 12 months.

 6% have been members for less than six months.

2011 budget reforms

Survey respondents were questioned directly about their views of the changes to the KiwiSaver scheme announced in the 2011 budget.

 54% of respondents who are aware of the changes think that the scheme has been weakened by them.

Respondents were also questioned about their plans to make changes to their KiwiSaver accounts in light of the reforms. Despite the above finding,  84% of KiwiSaver members surveyed did not plan to make changes to their account following the budget changes.

Attitudes to advice and risk

The majority of respondents obtain financial advice from multiple sources, including family/friends, financial advisers, and print and online media. Publicity about corporate collapses at the time of the global financial crisis has made changes in attitudes to risk evident in the survey findings, with:  60% of respondents now willing to accept average or high levels of market volatility for average or high returns.

Reasons for non-membership  

The main reason given for not being a KiwiSaver member is having sufficient savings and investments for retirement.  However, concerns about the government were also highly ranked, particularly those related to uncertainty about the future structure of the scheme due to beliefs that changes are likely in future.

(Updates with links to default providers and their respective default funds).

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The problem here is not the part about "forcing people to save". The problem is the "forcing people to save so that greedy politicians will have something else to loot" bit.

Politicians, bankers,businessmen who don't want to risk their own money.

Oh this is great...a survey carried out by those who stand to gain from the compulsory transfer of private income into their control that promises endless fat fees for them. Bloody wonderful.

Absobloodylootley right Wolly !

This is the same administration that does not want you to know ,the figures for those aged between 16 and 24 who are ....not employed...not in training... or in fact in any form of job facilitation programme,000. Dept of Statistics

John Boy does not want to discuss it ...the inconvenient truth I what was the figure  they were targeting with the card to control benifit spending...? 16 to 18 yr a flagrant exercise in tokenism at best.......

I said it would bite them in the ass, and it has already with a letter Paula Bennett responded to a constituent having been made that back in May ...she herself  did not support such a move and felt it was an intrusion on the right of choice.

Seems to me the Govt. have taken the pulse of the Nation and misdiagnosed it completely...

No mistaking it .....these are the politics of the SMUG...... Don't be fooled John Boy...nobody likes a smug bastido....

Kiwisaver is a very poor investment unless you are near retirement. Over 60’s or those who are self employed and can limit their contributions to match the government subsidy may benefit. Everyone else will be shafted by the high fees, low returns and loss of control of your money. The kickstart bribe will look pretty pathetic over the medium or longer term. There are no tax advantages and no out, baring IRD approved ‘holidays’.

No wonder FINSIA like it, they are creaming it from KS members.

No way should it be compulsory, I am doing far better managing myself. The huge tax contributions I have put into the slush fund that may be dribbled back as government Superannuation should be returned to me if compulsion into KS is considered.

Some KiwiSaver funds have delivered poor returns, others have done better; some charge high fees, others lower   Are KiwiSaver funds systemically less well managed and more expensive in terms of fees than are managed funds in general - or is your complaint really about managed funds in general? 

I do agree with you that it shouldn't be compulsory.  Some people are better off out of it, and you're clearly one of them.  But that doesn't make it a bad deal for everybody.

MdM a managed may form a part of a diversified investment portfolio, I would suggest it is risky to rely on managed funds especially where its subject to government rule changes. Managed funds suffer from poor performance relative to high fees. With Kiwisaver you cannot get out so you will be paying the fees till 65. Also managed funds suffer from Unitisation where you have no definite idea of what you own, just a arbitrary unit value. Also the provider generally takes Reserves out of the fund which then become assets of the provider rather than the members further eroding your assets.

Bit of a looser really especially over the medium/long term. We should compare assets in a decade or two.

That wouldn't be a fair comparison.  I'm not trying to prove that KiwiSaver would be the best use of your money.

The real comparison would be between how my KiwiSaver account does, and how the same amount of my money would have done if I had managed it, devoting exactly the same resources (time, effort and expertise) that I devote to the management of my KiwiSaver fund.

You're evidently very confident that you can outdo Kiwisaver fund managers, and you are prepared to devote your own time and effort into doing that.  Good for you.  Respect.   I, however, in common with many others, am neither; and I think it's only sensible to recognise that.

Absolutely MdM. One thing my father taught me is look after your own money. If others are so good at it why are they asking for yours? I think it is a basic responsibility and no it does not take a lot of time and I am not a financial wiz kid, quite the opposite.

I do not intend to outdo KS fund managers. That could be achieved on average over the period of KS by sticking the money under your bed. Of course most members don’t see this yet because the government has been pumping in contributions. Remove/reduce these from your calculations (as the government is currently doing) and your account will not look quite so high performance. Then at least try bank term deposits, not hard to calculate or manage.

I'm with you on this Laurence. Look after your own money. Anyway, if you're going to do some research on which fund manager you'd hand your future savings over to, then why would you not use this time to set up your own savings plan? Or would people just look to the current highest returning fund and go with that, you know, assuming that they'll carry on the same trajectory.


Another question re the survey. I'd love to see a breakdown of the demographics of the survey respondents.....

51% of respondents said that the primary reason for joining was the importance of saving for retirement.

One problem is whether in 30 or 40 years time, you will get your money back.

Compulsion would mainly benefit the fund managers, bankers and the likes. The industry must have been doing a lot of lobbying, which is probably not difficult seeing that we have an ex-money trader leading the government.

In any case, 57% is not really a big majority.

The first issue I have is the compulsory side of things, the second is where the savings are held in the meantime. Then there's the question of who is going to managing these savings which leaves such a scheme so open to corruption it's not funny. Or should I say, we didn't know that.

The long term problem with legislated super is always poor performance.

Why innovate?

Who needs to perform?

If it's the law then you have to give me your money regardless.  Legislation trumps performance every time.

This is all about saving the fund managers money flows. The govt meanwhile intends washing away debts by debasing the currency. Savers take note....your money in the bank account is declining in purchasing power by the rate of inflation every bloody you like them apples?

Govt is again picking winners, the finance sector.  Forcing you to give your money to someone else to controll and invest how they see fit, has no real advantage to the one givng the money.

In australia you can create your own super fund, and manage however you want, in the past they have outperformed managed funds, (possibly through investing in property).

The stock market is stuffed, the banking sector is stuffed, capatilism is stuffed, and now 51% of real people want to be forced to pump money into the dying beasts. 

The world is being run by bankers and economist what else can you expect, failed economic experiments all over the world. 

Superannuation was initially the responsibility of the employer, and you stayed with the same employer and he looked after you, then it was shunted onto the taxpayer via the state, now the state won't do it and is trying to force it directly onto the employee.  So now we pay for our own super, via kiwisaver, and pay for the babyboomers super via taxes.

Yikes people...there's some upsides here. ie. having the ability to power-save your way to deposit for a first-time home for instance. Those individuals who weren't asleep at the switch and started socking away their money intoa solidly performing fund with a fund manager who knew what they were doing (had the benefit of  $1,000, government tax credits and employer contributions) surely aren't crying about KiwiSaver. There's a few fund managers that will have made their investors happy, ie. Fidelilty with its options funds cranking out a three-year annualised returns of more than 11%. Look for the bad news and you will always find it.

Where are the funds putting their money?  Shares and the Great Depression what happened to these in terms of value?

I think you are probably going to witness an exercise in risk management and loss, the 11% is  not a risk free rate of return.

For instance in 2008 one of my main pension funds (that I took out at 17% around 30 years ago) lost one year.....its bounced back somewhat but given the real dip is here I expect it to lose again.....I cant touch or move that money.  When I came to NZ I decided these funds were a crook, so I bought shares, I sold them all last june year.....I had huge flexibility....Ive had no loss.

I think the biggest weakness is ppls lack of financial awareness and capability, from what Ive seen with pensions funds its a case of the illiterate handing over years of earnings to the semi-literate.....who clip the we want to grant a Government monopoly for the ticket clippers. 

Further whats the real return?  less than paying down the mortgage faster.  Now at least if this compulsory scheme includes a compulsory element where you pay down the mortgage faster I'd be a lot happier.....

Consider debt in a depression and its effects.....the real cost to service it becomes higher....even crippling.  Congrats with this idea you have removed (potentially) my ability and freedom to counter risk by getting out of debt faster or even at all.  Further Govns can take  savings off you in dire circumstances, they cant load you with debt as a lump sum for ever on the other if the tax burden is too high you can leave the country.


This is a good place to start



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Your enthusiasm for Kiwisaver seems boundless Amanda - I note thats the second or third time you have wheeled out the 3 year performances of various funds to back up your contention that Kiwisaver is wunderbar. Fortunately for you that period largely encapsulates the period over which the Fed was desperately re-inflating the stock market after the 2007/8 crash - and most Kiwisaver accounts dont have 5 year performance histories which would have captured the 2007 market peak and subsequent crash (which we have not yet recovered from). On a longer timeframe dont forget that some indices are still below where they were 10 years ago.

Still never mind,  the next market crash is on its way - once that data is incorporated into Kiwisaver providers annualised returns don't be a stranger in coming back and telling us what they are........

Yep, should take 6 years say....this is a dead cat bounce, frankly a professional should know better IMHO.


So Amanda you went with Fidelity and the Options fund, well done! You will have done ok on paper so far, less a few fees. How long till you can realise your gain? couple or more decades perhaps?

Oh but you can use some for your first house eh, however there are a few hooks in the much vaunted subsidy as to the type of area and value of house you can buy.  Good luck relying on this and keep a wary eye on successive government rule changes and markets over the next few decades.

I prefer to retain control over my money and have every faith that any NZ'dr can as shown by AU and Singapore folk.


I think maybe the heading should have been "most fundmanagers support kiwisaver"