Advisers aren’t surprised at New Zealanders’ low levels of understanding about KiwiSaver.
Mercer has released its latest KiwiSaver Sentiment Index, which shows that while a third of New Zealanders think they have a good understanding of KiwiSaver, there are still some big gaps in their knowledge.
Only 31% of working New Zealanders confidently understood that the Government’s maximum tax credit is $521 a year. More than 60% were unsure whether that was the right amount or not.
Most KiwiSavers miss out on the full tax credit because they do not contribute enough to their own accounts to qualify.
More than half the respondents also thought that a new employer would automatically start to contribute to their KiwiSaver accounts.
And only 28% realised that more than one tax rate applied to KiwiSaver investment earnings.
Financial adviser Carey Church said she was not surprised at how few fully understood the tax credit. “I actually think the real number could even be lower than 31%.”
She said financial information was not a high priority for many people.
“Many people just want to know that their balances are increasing and they aren’t getting ripped off. Is it that important that they know how much they are getting in detail from the Government?”
She said it was more important that people understood the type of investments their funds were investing in and the risks around them.
“But again, I think a lot of people don’t want to know. Unfortunately, with the banks promoting that if people move their KiwiSaver to them they can see their balance, the focus will be short-term, on whether their balances are increasing. Therefore, communication will be required when markets and values fall, after the horse has bolted.”
She said more workshops and seminars would add value for KiwiSavers.
“When we do seminars in the workplace, people want to attend – as it is convenient and it is free. Are many seminars provided these days? It seems that these have gone out of fashion. If people aren’t interested, they won’t read, or do anything unless it is made easy for them.”
Don Stewart, of Share, agreed. “It does not surprise me as the level of advice and KiwiSaver education, given to consumers at time of joining a KiwiSaver scheme, is not provided. A consumer who has been enrolled into a default fund or simply over the counter at a bank may be given an investment statement which very few will read. Those consumers who have used an adviser will have a higher level of advice and understanding of KiwiSaver maximum tax credits and their PIR. “