Mid-50s KiwiSaver members encouraged to consider switching funds

Monday, 14 May 2018

If you've reached your mid-50s and think you've left it too late to get on track for your retirement, think again.

The Financial Markets Authority, Ministry of Business, Innovation and Employment (MBIE) and the financial services industry have been working together on research into how best to encourage KiwiSaver members to make an active decision about their investments.

The second trial of its type, run with ANZ, focused on members turning 56. That is a point at which the bank's lifetimes fund would automatically move a member from a balanced fund to a conservative balanced funds.

These members were specifically targeted for the trial after previous FMA research showed those getting information or advice 10 years out from retirement were more confident in retirement.

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The trial involved just over 2000 participants. Members received either an original letter notifying them of their new fund allocation or an updated letter created using behavioural insights.

The updated letter included prompts to check their retirement savings were on track by using online tools or by calling and speaking to an ANZ adviser. Members were also told most people who sought advice did so when they were in their 50s.

More people who received the updated letter switched funds and MBIE analysis has determined the interim results to be statistically significant. The trial has now been extended to include emails to members. This is because emails tended to be more effective in prompting members to take action than a letter.

Simone Robbers, FMA acting director of external communications and investor capability, said: 'Providers regularly send letters and e-mails to their members and we would like to see more providers adopting these techniques. Adopting communications that use behavioural insights can influence more members to think about their financial future and then take action.' 

Ana-Marie Lockyer said people could still make a difference to their outcomes with 10 years to go.

The scheme is currently only 10 years old so people with 10 years left were making a change that would affect half of their KiwiSaver lifespan.

She said people should try to check in with their KiwiSaver accounts at several points through their lives, such as when they started work, in their 40s once they had passed big financial hurdles such as buying a first home and then closer to retirement. 

Whether moving to a more conservative fund at 56 was the right move would depend on an individual's circumstances. Many people will be retired for 30 years or more, so some allocation to growth assets in the first part of their retirement will better help the money last.

Lockyer said it was a good opportunity to check the settings on a KiwiSaver account and whether the member was on track for their goals.

A third behavioural insights trial, involving AMP and Inland Revenue, is scheduled to get under way shortly.