Kiwis concerned about retirement savings

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.

Most Kiwis support compulsory KiwiSaver

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.

ASB KiwiSaver comes out poorly in survey

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.

Kiwi Wealth to invest up to $50 million in Pioneer Capital

Kiwi Wealth KiwiSaver has committed up to $50 million to leading investment firm Pioneer Capital with a focus on New Zealand businesses exporting high-value products and services in large international markets.

The commitment is part of Pioneer Capital’s latest $300 million fund –  Pioneer Capital Partners IV – and sees Kiwi Wealth joining cornerstone investors such as the NZ Super Fund ($100 million invested) and Ngāi Tahu Holdings ($30 million), with funds being drawn down as underlying investments are made.

The news follows last year’s announcement of Kiwi Wealth KiwiSaver Scheme’s cornerstone investment in the Movac Fund 5, a technology fund of venture capital firm Movac.

Its latest investment is designed to give KiwiSaver members more access to private business in the high-growth export sector.

Kiwi Wealth retail and product general manager Melissa Vasta says Pioneer Capital has a strong track record in an investment market where there are few players in New Zealand.

"This is good news for 'NZ Inc' and follows the direction of travel for global investment and the delivery of value to shareholders," she says.

"Kiwi Wealth KiwiSaver Scheme members will know that some of their investments are being held in companies that are generating value for the New Zealand economy, creating local jobs and delivering good

"While this is a small allocation of our total KiwiSaver funds, it represents a significant opportunity for internationally focused Kiwi businesses to continue to make their mark on the world stage.”

Since it was founded in 2005, Pioneer Capital has invested in 23 Kiwi businesses that have an aggregate annual revenue of over $1 billion, of which over 85% is earned outside New Zealand.

Kiwi Wealth chief investment officer Simon O’Grady says the agreement with Pioneer Capital represents another step in Kiwi Wealth’s burgeoning series of private equity investments.

He says Pioneer Capital sits attractively in the mid-stage between start-ups and the mature end of the market, focusing on expansion capital for high-value export enterprises with established operating bases – in particular, health and wellness, premium food and beverage, and technology-enabled businesses.

Pioneer Capital managing director Randal Barrett says Kiwi Wealth is one of the only KiwiSaver providers to give its members access to private businesses in New Zealand, which make up the vast majority of New Zealand’s economy by proportion of GDP and industry diversity.

“In the pandemic economy, private equity-owned businesses have had the luxury of being tightly held and governed so they can make quick decisions and move to avert risk and take advantage of opportunity.

Barrett says Pioneer Capital Partners IV will make its first few investments into high-value export-focused companies within a year and, as an open-ended fund, can take a long-term view with these and additional investments.

“New Zealand is incredibly well placed in the world markets; its profile has risen and in the sectors in which we focus many New Zealand companies are internationally competitive and have grown to scale very quickly in large markets.

"Our goal is to turn these companies into mini-multinationals, with operations on the ground locally and capability around the world."