KiwiSaver

More than 60% of New Zealanders are worried they will not have enough money to support themselves in their retirement, a new study shows.

According to research undertaken by the Financial Services Council (FSC) – KiwiSaver at a Crossroads – almost three-quarters of those surveyed would also like KiwiSaver to be compulsory and support an increase in contribution rates.

However, with the average KiwiSaver balance sitting at just over $25,000 many Kiwis will find it difficult to retire comfortably.

As KiwiSaver celebrates its 14th birthday this month, the FSC has released new research looking at what New Zealanders think about the scheme that has around $82 billion invested, the role it plays in their retirement preparedness, and where it needs to head in the future.

“This research shows that New Zealanders overwhelmingly support KiwiSaver and want its role to be increased”, says FSC chief executive Richard Klipin.

“With 78% supporting compulsion and almost three quarters (73%) supporting an increase in contribution rates, there is widespread public support for action in both areas.

“As an additional indicator of support almost 80% of respondents thought they were getting value for money for the KiwiSaver fees they pay."

Klipin says the research also found New Zealanders are deeply worried about not having enough savings for their retirement.

“64% of New Zealanders, which represents 2.5 million people, are worried they won’t have enough to retire comfortably or afford where they want to live.

“With the average KiwiSaver balance just over $25,000, there’s a yawning gap between what New Zealanders have in their KiwiSaver and what they need to save," he says.

“That means most Kiwis will fall short of being able to fund a modest retirement, let alone a comfortable one."

Klipin says when you consider property ownership is on the decline and many younger Kiwis probably won't own their own homes by retirement, $25,000 is not going to be enough.

“With 17% of New Zealanders not contributing to KiwiSaver at all and more than 30% contributing only the minimum 3% there’s no doubt that we need to do more to help New Zealanders build their KiwiSaver balances,” says Klipin.

Financial literacy was also an issue with a quarter of survey respondents saying they didn't know how much they needed in retirement, and 22% didn't know the balance of their KiwiSaver.

Klipin says that while overall, the findings show New Zealanders strongly support changes to KiwiSaver, a wider discussion is needed and there is a trade-off between the pace of change and affordability.

“Implementing changes as part of a phased approach would help ensure that vulnerable customers are not thrown in the deep end right away and have time to prepare for any significant changes to the KiwiSaver scheme.

“KiwiSaver has made good progress over its first 14 years, and we hope this research illuminates some of the issues and the possibilities for a way forward.

“Getting these issues right is not easy and we don’t claim to have the answers."

The research was conducted online between April 15 and 26 by CoreData and collected a total of 2,035 valid responses. It is representative of the New Zealand consumer population in terms of age, gender and income based on the latest Stats NZ data.

About 78% of New Zealanders support making KiwiSaver compulsory and 73% support an increase in contribution rates, according to a survey commissioned by the Financial Services Council.

The council, whose members are KiwiSaver providers, said the survey of 2,000 people was conducted by CoreData.

"As an additional indicator of support, over 75% of respondents thought they were getting value for money for the KiwiSaver fees they pay," said FSC chief executive Richard Klipin.

"The research also found that New Zealanders are deeply worried about not having enough savings for their retirement," Klipin said.

The average KiwiSaver balance of just over $25,000 means "there's a yawning gap between what New Zealanders have in their KiwiSaver and what they need to save. That means most Kiwis will fall short of being able to fund a modest retirement, let alone a comfortable one", he said.

About 17% of New Zealanders are not contributing to KiwiSaver at all and more than 30% of those who are contributing pay in the minimum 3% of earnings.

All New Zealanders over age 65 are entitled to government superannuation which is currently $506.64 a week before tax for a single person and $768.92 for a couple.

Westpac NZ is reducing fees on its KiwiSaver Scheme funds saying the drop will deliver significant savings for its more than 380,000 members.

As well as removing its annual $12 administration fee, the bank is also cutting a range of fund charges by up to 39%.

BT Funds Management NZ manages the Westpac KiwiSaver Scheme.

It was re-appointed as one of six KiwiSaver default providers in May this year following a seven-yearly Government review.

Annual fees on a $20,000 balance will reduce from $130 to $80 for its Conservative Fund, $158 to $100 for its Balanced Fund and $172 to $110 for Westpac's Growth fund (see chart below).

Westpac NZ acting chief executive Simon Power says the reductions will help Westpac KiwiSaver Scheme members grow their KiwiSaver balances.

“These changes will provide real savings for all members, regardless of their fund balance or stage in life.

“We last cut our Westpac KiwiSaver Scheme fees in December 2019, and we’re pleased to follow this up with another significant reduction for members," Power says.

“Removing the annual administration fee will have a particularly positive effect on members with low balances."

Fees for Westpac’s Cash Fund will drop from 0.29% to 0.25%, fees for its Balanced Fund will drop from 0.73% to 0.50%, and Growth Fund fees will drop from 0.80% to 0.55%.

The fee changes on existing funds will take effect at the end of September and Westpac's new Default Balanced Fund will open to members in December.

Members will be notified directly of the changes in the coming months.

ASB KiwiSaver ranks last for customer satisfaction, Consumer NZ survey finds.

Just 43% of ASB customers were happy with the service they were getting. Consumer NZ chief executive Jon Duffy said ASB’s score was significantly below the market average of 55%.

“ASB also scored below average on all our key satisfaction measures. Just 37% of customers thought ASB did a good job keeping them up to date about their investment, compared with the industry average of 48%,” Duffy said.

ANZ, the biggest KiwiSaver provider, also scored significantly below average for overall satisfaction with a rating of 50%.

“The best performers this year were streets ahead. Milford Funds came out on top with 85% overall satisfaction. It scored particularly well for access to account information (93%) and keeping customers updated about their investment (84%).”

Simplicity was second placed (74%) and Aon New Zealand third (73%). 

"Our results show a big difference between the best and worst performers when it comes to keeping customers informed about what’s happening with their money," Duffy said.

Across the market, six out of 10 Kiwis didn’t know how their fund was faring compared with others. Fee transparency was also a big issue. Seventy percent didn’t know how much they paid in fees. The amount KiwiSaver providers earn from fees has continued to rise, totaling $539 million in 2020.

The survey also showed many Kiwis want to know their money is invested responsibly.

Almost half (48%) said they wanted a fund that provides a good return and invests responsibly – both were equally important. A further 13% ranked responsible investment as the priority.

One in three KiwiSavers said they would be very concerned if their money was invested in oil and gas exploration. However, 68% were unsure whether their provider invested in this area.

Changes announced by the government mean that from December default KiwiSaver providers will no longer be able to invest in fossil fuels. They will also be required to publish a responsible investment policy on their website.

Other changes to default schemes will see a drop in charges, a move which should put pressure on industry competitors to review their fees, Duffy said.