KiwiSaver

In what’s believed to be an industry first, the NZ Society of Actuaries has produced a report that analyses account-level data for a large segment of the KiwiSaver market.

Until now, nothing been published about the actual balances of KiwiSaver’s 3.09 million members, with most statistics focusing on averages. For example, the FMA’s annual KiwiSaver report for 2021 says the average balance across all funds is $26,410. Previous surveys of KiwiSaver accounts have been limited to average balances, total fund size and total contributions.

But averages don’t tell the whole story, says Ian Perera, the convenor of RIIG (the Retirement Income Interest Group, a subgroup of the NZ Society of Actuaries) and are “not particularly helpful” when it comes to KiwiSaver.

They tend to be higher than the median, which produces a more realistic picture as a few large balances can skew the average. “You learn a lot more by understanding the differences than by just taking the average,” he says.

RIIG’s survey and analysis focused on how individual account balances are distributed, revealing a cluster of low KiwiSaver balances at the bottom of the scale and a “tail” of large balances, including a few outliers of more than $1 million, at the other end.

So, for most members the balances are “modest”, meaning that for those near retirement, NZ Superannuation will still be a key part of their income, Perera says. The median balances in RIIG’s study for those aged between 60 and 64 were $38,000 for men and $31,400 for women. In the 64-84 age group, 17% of men and 13% of women have balances of more than $100,000.

RIIG’s information was gleaned from six KiwiSaver providers which supplied anonymised data about the accounts they manage for members aged 45+. The providers included bank-owned funds and specific fund managers. All are among the top 20 providers as of 31 March 2021 and three are among the top five. Information was supplied on each member’s date of birth, balance and fund type.

The first finding was no surprise. Men are more likely to have larger balances than women and are significantly more likely to have the largest balances: 13% of men in the 45-64 group have more than $100,000 in their accounts compared with only 6% of women. And at the other end, women are more likely to have balances of less than $50,000: 74% compared with 64% of men.

When it comes to fund choice, however, gender does not appear to be an indicator of tolerance for risk – at least, not until members hit 65. “The data does not support the idea that women between 45 and 64 are more conservative investors than men,” Perera says.

Across the board, the study found that most investors aged 45-64 choose conservative funds, with only 35% of women and 39% of men invested in funds holding at least 60% of growth assets.

The rule of thumb appears to be the lower the balance, the lower the risk tolerance. For those with account balances between $10,000 and $20,000, 45% of accounts held by men and 47% held by women are in funds with only 30% of growth assets. Only 21% of men and 18% of women are in more aggressive funds (75%-100% in growth assets).

When the government contribution of $521.43 a year is added, men clearly contribute more to KiwiSaver, with 46% of men and 33% of women putting in more than $4000. At the other end of the scale – annual contributions of less than $3000 – women make up 52% of the group compared with 43% of men. Perera describes these results as “not unexpected” as men in the 45+ population usually earn more than women, and KiwiSaver contributions are primarily made as a percentage of salary.

When it comes to drawing down KiwiSaver in retirement, Perera says low balances in the 55-64 age group mean that for most people, individual financial advice is not cost-effective. Most will need to rely on generalised guidance. But managing drawdowns is “one of the hardest problems in finance”, he says.

The way up is almost straightforward: save more, ensure you’re in a diversified fund and get your risk settings right. “But when it comes to ‘how much can I spend?’ there are so many different factors to consider. You don’t know how long you’re going to live, and inflation could be more significant. It’s a harder problem in some respects than saving.”

Perera says he hopes the FMA and Retirement Commissioner can use these survey results to develop a larger dataset that can be analysed to form a whole-of-sector view.

Now that it has data for the 45+ age group, RIIG’s next project will be to figure out what current KiwiSaver balances might look like when these members reach retirement.

In what’s believed to be an industry first, the NZ Society of Actuaries has produced a report that analyses account-level data for a large segment of the KiwiSaver market.

Until now, nothing been published about the actual balances of KiwiSaver’s 3.09 million members, with most statistics focusing on averages. For example, the FMA’s annual KiwiSaver report for 2021 says the average balance across all funds is $26,410. Previous surveys of KiwiSaver accounts have been limited to average balances, total fund size and total contributions.

But averages don’t tell the whole story, says Ian Perera, the convenor of RIIG (the Retirement Income Interest Group, a subgroup of the NZ Society of Actuaries) and are “not particularly helpful” when it comes to KiwiSaver.

They tend to be higher than the median, which produces a more realistic picture as a few large balances can skew the average. “You learn a lot more by understanding the differences than by just taking the average,” he says.

RIIG’s survey and analysis focused on how individual account balances are distributed, revealing a cluster of low KiwiSaver balances at the bottom of the scale and a “tail” of large balances, including a few outliers of more than $1 million, at the other end.

So, for most members the balances are “modest”, meaning that for those near retirement, NZ Superannuation will still be a key part of their income, Perera says. The median balances in RIIG’s study for those aged between 60 and 64 were $38,000 for men and $31,400 for women. In the 64-84 age group, 17% of men and 13% of women have balances of more than $100,000.

RIIG’s information was gleaned from six KiwiSaver providers which supplied anonymised data about the accounts they manage for members aged 45+. The providers included bank-owned funds and specific fund managers. All are among the top 20 providers as of 31 March 2021 and three are among the top five. Information was supplied on each member’s date of birth, balance and fund type.

The first finding was no surprise. Men are more likely to have larger balances than women and are significantly more likely to have the largest balances: 13% of men in the 45-64 group have more than $100,000 in their accounts compared with only 6% of women. And at the other end, women are more likely to have balances of less than $50,000: 74% compared with 64% of men.

When it comes to fund choice, however, gender does not appear to be an indicator of tolerance for risk – at least, not until members hit 65. “The data does not support the idea that women between 45 and 64 are more conservative investors than men,” Perera says.

Across the board, the study found that most investors aged 45-64 choose conservative funds, with only 35% of women and 39% of men invested in funds holding at least 60% of growth assets.

The rule of thumb appears to be the lower the balance, the lower the risk tolerance. For those with account balances between $10,000 and $20,000, 45% of accounts held by men and 47% held by women are in funds with only 30% of growth assets. Only 21% of men and 18% of women are in more aggressive funds (75%-100% in growth assets).

When the government contribution of $521.43 a year is added, men clearly contribute more to KiwiSaver, with 46% of men and 33% of women putting in more than $4000. At the other end of the scale – annual contributions of less than $3000 – women make up 52% of the group compared with 43% of men. Perera describes these results as “not unexpected” as men in the 45+ population usually earn more than women, and KiwiSaver contributions are primarily made as a percentage of salary.

When it comes to drawing down KiwiSaver in retirement, Perera says low balances in the 55-64 age group mean that for most people, individual financial advice is not cost-effective. Most will need to rely on generalised guidance. But managing drawdowns is “one of the hardest problems in finance”, he says.

The way up is almost straightforward: save more, ensure you’re in a diversified fund and get your risk settings right. “But when it comes to ‘how much can I spend?’ there are so many different factors to consider. You don’t know how long you’re going to live, and inflation could be more significant. It’s a harder problem in some respects than saving.”

Perera says he hopes the FMA and Retirement Commissioner can use these survey results to develop a larger dataset that can be analysed to form a whole-of-sector view.

Now that it has data for the 45+ age group, RIIG’s next project will be to figure out what current KiwiSaver balances might look like when these members reach retirement.

The finance industry says it is improving the KiwiSaver system but it is a work in progress.

A report by  Consumer NZ found New Zealanders preferred non-bank providers such as Simplicity and Milford ahead of the schemes offered by most New Zealand banks.

The report suggested people’s attitudes were soured by a market-led subsidence of KiwiSaver values. 

But there were other concerns, separate from market fluctuations, such as a lack of transparency about fund performance and the fees people pay.

“Three out of four KiwiSavers didn’t know what they paid in fees while 60% didn’t know how well their fund was doing compared with others on the market,” Consumer NZ wrote.
The chief executive of the Financial Services Council (FSC) Richard Klipin welcomed surveys and reports on KiwiSaver for “shining a light” on the industry.

But he defended his members against criticism.

“KiwiSaver companies are working really hard to serve their clients in really tough times …. and the Consumer NZ report provides an insight into some of the opportunities available to continually lift the bar.”

Klipin said both consumers and product providers were on an evolutionary journey and that would continue.

“I do think there is an underlying issue with financial capability in New Zealand, that we all have a responsibility to address, and that is to help New Zealanders be better with money.”

So, did the Consumer NZ report suggest the industry not done well enough up til now?

“I think it is a work in progress.”

Data gathered from almost three million members of KiwiSaver has highlighted the gender gap in Kiwis’ balances in the retirement savings scheme, and how overall both sexes are lagging behind where they would have expected to be at this point.

Te Ara Ahunga Ora Retirement Commission engaged Melville Jessup Weaver (MJW) actuaries to collect previously unknown data about KiwiSaver balances across age groups and gender.

The MJW report contains data on 2,944,050 members with total balances of $85.44 billion as at 31 December 2021, representing approximately 93% of the total KiwiSaver member base.

The average KiwiSaver balance is $29,022, with the average balance for a male 20% higher than the average balance for a female – males ($32,553) and females ($27,061).

The findings also reveal 40% of KiwiSaver members have a balance of less than $10,000.

19% of those with less than $10,000 are aged 17 and under
24% of those with less than $10,000 are aged 18-25
22% of those with less than $10,000 are aged 26-35

However, 21% of those aged 51-65 also have less than $10,000 and they may not have saved as much as they would have liked for their retirement.

Te Ara Ahunga Ora Director, Policy, Dr Suzy Morrissey says the MJW report highlights the popularity of KiwiSaver across all ages, including the over 65s, and the difference in average balances by gender at all ages.

“This is the first time we’ve had access to this level of data on KiwiSaver balances and demographics and gives a strong picture of how New Zealanders are contributing to the scheme and how popular it is.

“While not surprising, given KiwiSaver is a retirement savings scheme closely associated with the labour market, this report provides robust data to further highlight the gender savings gap, which is apparent across all age groups.

The widest gaps are between men and women in their 40s and 50s. On average,

women in their 40s have approximately $10,000 (or 30%) less KiwiSaver than men
women in their 50s have approximately $13,000 (or 32%) less KiwiSaver than men
This likely reflects the combined impact of the gender and ethnic pay gaps, time out of paid work, and the higher percentage of women than men that work part-time.

“KiwiSaver is one of two pillars in NZ’s retirement income system and while not perfect when using a gender lens is still a good scheme helping New Zealanders head into retirement in a better financial position. This highlights why NZ Super, the other pillar, is so important as it does not disadvantage women because of its universality.”

Te Ara Ahunga Ora asked MJW to develop hypothetical scenarios for people who had invested in KiwiSaver for 14 years (the maximum time possible) without making any withdrawals and compare them to the average balances. The median wage for each cohort was used to determine the contribution amount (minimum employee and employer) and government incentives were included.

For example, a woman who joined KiwiSaver in a conservative fund when she was 20, who is now 34, could have built up a balance of $46,878, but the average balance for those aged 31-35 is only $19,141 (as at December 2021), a difference of $27,738. A man in the same cohort, could have built up a balance of around $53,381, compared to the average balance of those aged 31-35 of $22,738 (as at December 2021), a more than $30,000 difference.

“What this has revealed is when comparing current balances to what would have been possible for a median wage earner to have accrued over the 14 years of KiwiSaver, we see that they are lower, on average, across all age groups,” says Dr Morrissey.

“Part of this can likely be linked to first home deposit withdrawals and saving suspensions, and people not participating in the scheme for the full 14 years that it has been available.

“Access to this data is particularly useful to support our work which is underway on the three-yearly Review of Retirement Income Policies where we are considering a wide range of areas relating to retirement.”

The Retirement Commissioner will submit a report to government in December providing analysis on the effect of retirement income policies for New Zealanders and identify emerging issues for future policy consideration.