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 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.”
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.
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.
“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).