KiwiSaver

The number of New Zealanders joining KiwiSaver continues to beat initial expectations, finance minister Michael Cullen said today.At the end of January, 414,144 Kiwis had joined up, compared with the Treasury’s initial projection of 276,000 by July 2008.

Cullen believes the surge in New Zealanders saying yes to personal saving, despite unstable international markets, is a sign the country’s ‘savings culture’ is growing stronger. He believes more people are keeping “an eye on the long-term benefits of saving and investing.

“KiwiSavers are focusing on the long term and that is good news for the long-term economic and social well-being of the whole country.”

Revenue minister Peter Dunne believes one of the most positive aspects of the latest data on registrations is the popularity of KiwiSaver amongst younger people.

He believes the level of registration among young adults indicates that KiwiSaver is encouraging greater levels of savings, compared to if the scheme had not been introduced.

“Starting the savings habit early will mean that these young people will be able to generate significant savings by the time they retire and in some cases will be able to use their savings to buy a first home,” he said.

At the end of January 2008, around 55% of KiwiSavers were under 45 years of age and around 22% were younger than 25.

AXA’s annual international retirement survey confirms one thing about KiwiSaver – it has got people thinking more about their retirement.The annual survey – the fifth held including New Zealand – shows three quarters of New Zealanders are now making some preparation for their retirement.

A year ago the figure was two thirds.

The survey, of more than 600 people, was taken at the time KiwiSaver was introduced, says AXA New Zealand chief executive Ralph Stewart.

New Zealanders came top of the survey in terms of happiness with their preparedness for their retirement – a result which could be partly the result of a universal pension, the advent of KiwiSaver, and a certain amount of “she’ll be right,” attitude.

What is of concern in the survey’s results, says Stewart and Arcus chief economist Rozanna Wozniak, is the low level of financial literacy in New Zealand and the unwillingness to get into investments other than low risk products.

AXA is encouraging those who get allocated into its conservative default fund to look at balanced or growth fund options.

“But the timing hasn’t helped, of course,” says Stewart, referring to the current international equity market turmoil.

And Wozniak says New Zealanders’ timorous approach to investment has led to an unsustainable property boom and also ill-advised investments in finance companies.

Finance companies looked a safer bet than a balanced or growth managed fund, she says, “because people thought they looked like term deposits.”

The Retirement Commissioner has entered the KiwiSaver analysis market with a fee calculation tool.It says the tool will help people “with the complicated task of working out which KiwiSaver fund is most suitable for them.”

“Our independent estimate of KiwiSaver fees will help New Zealanders make a more informed decision on which KiwiSaver provider and fund to choose,” says Retirement Commissioner Diana Crossan.

The fees analysis was completed by actuaries Melville Jessup Weaver and reviewed by several KiwiSaver providers and independent experts.

One of those is Michael Littlewood, a director of KiwiSaver provider SuperLife. Littlewood went public recently bagging a site which competes with the commission’s one.

Crossan says estimated fees are only one thing people should look at when selecting KiwiSaver funds. Other factors include the level of risk (and associated return), service level and communication offered by the fund provider.

The number of New Zealanders signed up for KiwiSaver at the end of the scheme’s first six months is far more than was expected for its first year, announced Finance Minister Michael Cullen and Revenue Minister Peter Dunne.
Press Release

As at 31 December, 381,000 New Zealanders were actively saving for their retirement through KiwiSaver. That compares to an initial forecast of 276,000 by 1 July 2008.

“The verdict on KiwiSaver is in,” Cullen said. “New Zealanders want to save for a better retirement and they know KiwiSaver makes that easier than ever before.

“New Zealand has a savings problem. We were recently ranked 108 out of 131 countries for our national savings rate. If that poor performance were to continue the consequences for our economy and for our living standards in retirement would be significant.

“KiwiSaver will address imbalances in the economy, create a domestic pool of capital to help local business expand and succeed, and will lift living standards in retirement.”

“One of the things that is particularly exciting is the continued popularity of KiwiSaver among younger New Zealanders,” Peter Dunne said. “Over 55% of KiwiSavers are under 45 years old and over 20% are younger than 25 years old.

“Starting the savings habit early will mean that these young people will be able to generate very significant savings by the time they retire and in some cases will be able to use their savings to buy a first home.”

Crown payments to KiwiSaver scheme providers in December totalled $104 million. Overall more than $300 million has now been transferred since the scheme’s launch on 1 July 2007.