KiwiSaver

Two thirds of owners of mid-sized New Zealand businesses surveyed for the Grant Thornton International Business Report say that fewer than 10% of their employees have signed up for KiwiSaver.In nearly 20% of cases, no staff at all have signed up. And only 6.7% have more than half of their staff on the KiwiSaver scheme.

The Grant Thornton survey also found that 54% of business owners felt the KiwiSaver scheme would have a negative impact on them, while 56% considered it would have either no impact or a negative impact for staff.

“These results are interesting because they would seem to point to either a general sense of dis-favour or indifference to the scheme among many employers who are the owners of medium-sized businesses,” said Grant Thornton New Zealand spokesman Peter Sherwin.

“This is possibly an extension of their overall discontent with having to deal with so much Government-generated paperwork, red tape and the cost of compliance. The compulsory 1% employer contribution from April 1 will most likely create further irritation.

“On the other hand, the figures most likely also contain an element of lack of interest in KiwiSaver from employees.

“But whatever way you look at it, the initial response to KiwiSaver is not exactly stellar. And part of that could be that business owners see it as yet another burden for medium-sized businesses to shoulder.

“There is clearly the need for some work to be done yet to make KiwiSaver more appealing all round.”

Sherwin said if there was some encouragement for the scheme, it lay in the fact that 42.7% of the business owners felt it would have a positive impact for their staff and 20.7% felt it would have a positive impact for them as employers.

The results were obtained from questions specifically for New Zealand businesses, contained within the wider international survey.

KiwiSaver is all about the long-term prospects. That’s the message being shouted from the rooftops in the face of recent short-term uncertainty.AMP Capital Investors’ Head of Investment Strategy, Dr Leo Krippner, believes rationality is key.

“Over the 2007 December quarter, risk was realised rather than rewarded”, said Krippner.

“Growth assets generally had a poor performance, reflecting fears that a US recession might impact negatively on global markets. That left returns flat for the conservative diversified fund and negative for the balanced and growth diversified funds.

“But returns were reasonable for the year as a whole. AMP Capital’s conservative diversified fund returned 7.1%, our balanced diversified fund returned 6.9%, and the growth diversified fund returned 6.8%. These were more modest than 2006, but diversification and active management helped to hold returns up.

“For example, New Zealand commercial property was a good performer over the December quarter returning 1.9% and an outstanding 30.8% for the year. Conversely, the worst performer for the quarter and year was global property at -10.1% and -9.7% respectively. Holding more New Zealand property and less global property certainly made a positive contribution.

“Our central view remains for reasonable returns. We think global growth should continue at an even pace – although lower in the US and developed countries – and inflation should remain at moderate levels. Long-term horizon returns suggest that growth assets are reasonably valued. However, downside risks have become more tangible even over the past month. So, as an active manager of our clients’ portfolios, we think it prudent to be cautious at this stage.

“The key thing for New Zealanders who have started their KiwiSaver accounts to remember is to focus on the next three decades rather than the last three months. While market volatility has forced returns down, KiwiSaver has easily beaten the under the mattress alternative when the Government’s contributions are taken into account. And compulsory employers’ contributions which come into play on 1 April this year will also significantly enhance the KiwiSaver investment outlook,” said Krippner.

The number of New Zealanders joining KiwiSaver continues to beat initial expectations, finance minister Michael Cullen said today.At the end of January, 414,144 Kiwis had joined up, compared with the Treasury’s initial projection of 276,000 by July 2008.

Cullen believes the surge in New Zealanders saying yes to personal saving, despite unstable international markets, is a sign the country’s ‘savings culture’ is growing stronger. He believes more people are keeping “an eye on the long-term benefits of saving and investing.

“KiwiSavers are focusing on the long term and that is good news for the long-term economic and social well-being of the whole country.”

Revenue minister Peter Dunne believes one of the most positive aspects of the latest data on registrations is the popularity of KiwiSaver amongst younger people.

He believes the level of registration among young adults indicates that KiwiSaver is encouraging greater levels of savings, compared to if the scheme had not been introduced.

“Starting the savings habit early will mean that these young people will be able to generate significant savings by the time they retire and in some cases will be able to use their savings to buy a first home,” he said.

At the end of January 2008, around 55% of KiwiSavers were under 45 years of age and around 22% were younger than 25.

AXA’s annual international retirement survey confirms one thing about KiwiSaver – it has got people thinking more about their retirement.The annual survey – the fifth held including New Zealand – shows three quarters of New Zealanders are now making some preparation for their retirement.

A year ago the figure was two thirds.

The survey, of more than 600 people, was taken at the time KiwiSaver was introduced, says AXA New Zealand chief executive Ralph Stewart.

New Zealanders came top of the survey in terms of happiness with their preparedness for their retirement – a result which could be partly the result of a universal pension, the advent of KiwiSaver, and a certain amount of “she’ll be right,” attitude.

What is of concern in the survey’s results, says Stewart and Arcus chief economist Rozanna Wozniak, is the low level of financial literacy in New Zealand and the unwillingness to get into investments other than low risk products.

AXA is encouraging those who get allocated into its conservative default fund to look at balanced or growth fund options.

“But the timing hasn’t helped, of course,” says Stewart, referring to the current international equity market turmoil.

And Wozniak says New Zealanders’ timorous approach to investment has led to an unsustainable property boom and also ill-advised investments in finance companies.

Finance companies looked a safer bet than a balanced or growth managed fund, she says, “because people thought they looked like term deposits.”