Close to 20,000 new members joined the national retirement savings scheme in the month of August, an uptake the likes of which has not been since before the May budget when changes to KiwiSaver were announced.
Tower Investments, in its monthly analysis of KiwiSaver statistics, said the 1.1% increase in total member count brought enrollment levels just shy of 1.8 million.
“If this rate of sign up persists, the total member count will exceed 1.8 million at the end of this September and will reach two million within 10 months,” said Tower's CEO Sam Stubbs, attributing the growth trend to renewed economic confidence and hirings related to the Rugby World Cup.
“There has been some optimism recently expressed in business confidence surveys that might be reflected in more automatic enrollments of new employees.”
“The Rugby World Cup may also have increased automatic enrollments due to a burst of new hiring to cope with expected demand from rugby fans.”
Around 9,000 new members each came into KiwiSaver through auto-enrollments or a provider of their own choosing.
"With all the doom-and-gloom spilling in from overseas regarding Europe’s sovereign debt problems and America’s near recessionary economy, it’s a positive sign that the automatically enrolled category grew by a healthy 1.4%,'' said Stubbs.
Stubbs said the one potential downside of the "robust growth in automatic enrollments" was that many new members might end up in funds that were not suitable to their needs, age, or risk profile.
That's because KiwiSavers who join through auto-enrollment are put into default funds unless they actively make an alternative choice.
Default funds have proved to be a safe haven for investors during the global financial crisis because of their conservative asset allocation. However, there is a belief that investors could miss out on better long-term returns delivered through equities.
To read more about the type of funds on offer and the difference see our introduction to KiwiSaver here.