KiwiSaver membership is poised to break the two million mark before the end of the year with new enrolments averaging between 15,000 and 20,000 a month since the start of 2012.
Default provider Tower Investments, in its latest KiwiSaver analysis, notes the savings scheme is now 50,000 shy of reaching two million.
Chief executive officer Sam Stubbs attributed the membership growth to new workplace enrolments and also KiwiSavers who opted out returning to the scheme in light of recent debate about the unsustainability of New Zealand Superannuation given demographic pressures.
Stubbs said it was of "significant interest" that the monthly percentage growth rate for automatic enrolments into default funds had averaged about 1% per month since 2012.
He said the high level of KiwiSavers invested in default funds suggested that "more work needs to be done around educating people about choosing a KiwiSaver fund that best matches their personal risk profiles.” Just over half a million KiwiSavers are in default funds as a result of not having made an active choice about what kind of fund they want to be invested in.
“For many new KiwiSaver members, a default fund could be too conservative for their personal risk profiles and not produce the rate of investment return they will need to have a decent nest egg to help fund their retirement, unless perhaps they intend instead to use their KiwiSaver account to help save up a home deposit.”
Default funds are typically a mix of 80/20 cash and fixed interest investments to equities whereas growth funds are the inverse and balanced or moderate funds are more even mix of asset classes.
For more information on the types of funds in KiwiSaver and how they differ read this.
Stubbs said whilst pension age eligibility and concerns related to the exponential increase in New Zealand Superannuitants (from 500,000 in 2010 to 1.3 million in 2050) was getting a public airing the related issues of health care costs for an ageing population (whose life expectancy is longer than ever) had yet to get a "similar airing.''
Additional costs for Government related to an ageing population will put more pressure on the financing of the pension system.
According to a recent C.D. Howe report out of Canada, annual health-care costs for a person over 65 are three to four times greater than for someone under 44. For a person over 85, they’re 12 times greater.
Stubbs said New Zealanders joining KiwiSaver as a safeguard against any changes in the New Zealand Superannuation (NZS) shouldn't comfort themselves by thinking their KiwiSavings were sufficient savings to last in old age given the macroeconomic forecast.
“Any retirement saving-related consideration of the future costs and entitlements associated with New Zealand Superannuation and the public health system needs to be weighed in conjunction with what meaningful rates of contribution to individual KiwiSaver accounts should be.”
“Even if the statutory contribution rates aren’t changed and won’t be sufficient for many people to achieve a desired target nest egg, KiwiSaver scheme members can always increase their retirement saving contributions voluntarily through higher regular deductions from wage or salary."
The Financial Services Council earlier this week proposed a "KiwiSaver Plus" system that would have contribution rates boosted to 10% in order to maintain the age of eligiblility for NZS at 65.
Despite the growth rate of KiwiSaver, the Financial Markets Authority, in its most recent annual report on KiwiSaver, noted that 45% of KiwiSavers are not actively contributing to their accounts.