Hardship, fee focus and lack of engagement in KiwiSaver a worry for ANZ

Monday, 4 September 2017

Some survey respondents said it was too hard to work out how much they might have saved by the time they were 65.

KiwiSaver is a key part of many New Zealanders' retirement plans. But when it comes to the details, a large number of us still don't really care.

A new survey and whitepaper from the country's largest KiwiSaver provider have highlighted some of the problems with the retirement savings scheme, and made recommendations to improve it.

Savers needed to get back on track once they withdrew money for a house, ANZ said.

ANZ Investments said KiwiSaver members had started to focus more on the fees they paid.

Its research showed younger people were particularly concerned about keeping fees low, even if that came at the expense of returns.

* 10 years on, 10 KiwiSaver questions remain

* Many KiwiSaver members don't understand how credits work**

'This trend is a concern, as choosing a fund solely on fees means members may miss out on greater returns and a larger balance in the long term,' the investment team said.

'This issue is emphasised when considering the impact of compounding returns, as higher returns should compound at a higher rate.'

It was also worried by the number of people who turned to their KiwiSaver accounts to bail them out of financial strife. More than 10,600 members withdrew almost $60 million from KiwiSaver in 2016, about $18m more than in 2015.

ANZ said a centralised agency, such as Work and Income, should co-ordinate the hardship pre-assessments to ensure there was consistency across the industry and that all avenues of support had been explored.

'With more and more people drawing on their KiwiSaver savings to support them in financial hardship, it's essential the industry has a streamlined process is in place to ease the experience on stressed applicants.'

It said too many people were not contributing to their KiwiSaver accounts, staying on contribution holidays too long, or not saving as much as they should. Many were not in the right type of fund for their circumstances.

Among its other proposals were requiring providers to offer free advice, to check in with everyone who withdrew money for a house a year later to make sure they were back on track for retirement, and help for people thinking about withdrawing their money in retirement.

ANZ also threw its weight behind making the system compulsory, which 60 per cent of the survey respondents supported.

By the numbers:

73 per cent know 'not that much or hardly anything' about their KiwiSaver providers' investments.

32 per cent think they should be allowed to withdraw money from KiwiSaver to buy houses that are not their first homes.

63 per cent have not calculated how much they are likely to have saved by the time they are 65. Thirty-five per cent said that was because there was too much uncertainty, 27 per cent said they did not feel they needed to, 24 per cent indicated they did not care and 22 per cent said it was too hard or they do not know how to.

57 per cent said people earning less than the average wage should get additional tax benefits to increase thier contributions.

56 per cent say companies should have to keep making employer contributions while their staff are on parental leave.

15 per cent think personal contributions should be automatically increased for those who have used KiwiSaver funds to buy a first house, so that they can rebuild their balances faster.

65 per cent would take up the option of increasing their contributions by 1 per cent any time they had a pay rise.

33 per cent of women are confident they will meet their retirement savings goals, compared to 51 per cent of men.