Strong support for compulsory KiwiSaver, increase in contribution rates – research
The study also shows that Kiwis are worried about their retirement options: almost three-quarters (72%) of respondents thought they might have to work beyond the age of 65.
More than half (65%) thought their savings were not on the right track and 64% said they might not be able to afford where they wanted to live. More than a quarter (33%) were not sure how much monthly they would need.
Financial Services Council chief executive Richard Kilpin said the research highlights Kiwis’ concerns that they will be able to live comfortably in retirement and want KiwiSaver’s role to be increased.
“With 78 percent supporting the compulsion and nearly three-quarters (73 percent) supporting an increase in premium rates, there is broad public support for action in both areas,” Kilpin said.
Two-thirds of those surveyed said they rely on KiwiSaver to save for their retirement and 38% use it (or plan to use it) for their first home.
But almost a quarter of respondents did not know how much they would need in retirement. Across all age groups, 43% thought they would need $ 750,000, 15% thought they would need $ 750,000 to $ 1 million, and 17% thought they would need more than $ 1 million.
While making KiwiSaver mandatory is not part of the policy plans, Kilpin says concerns about whether the savings are adequate is a starting point for discussion.
“We can’t slow down the march towards a retirement future if we don’t anticipate it… the underlying concern and anxiety of ‘will I have enough’ is clearly reflected in the data,” Kilpin said.
The latest data from the Financial Services Council shows KiwiSaver’s average balance to be just over $ 25,000.
The largest proportion of respondents (31%) contributed at the minimum rate of 3% of their income (before tax). Slightly less (15.7 percent) contributed 4 percent and a total of 24.5 percent contributed 6 percent, 8 percent or 10 percent.
“What this research alludes to is [that] you can’t put in 3% and assume you’re going to be in a good position when you retire, ”Kilpin said.
A study on retirement spending in New Zealand in 2020 by the Fin-Ed Center at Massey University shows that a single person living in New Zealand metropolitan centers and wanting to live a ‘no frills’ lifestyle might expect to spend $ 693.30 per week ($ 983.60 for a “choice” lifestyle).
The Financial Services Council confirms that, based on Massey’s spending guidelines, a “no-frills” lifestyle would require savings of $ 721,032 ($ 693.30 x 52 weeks x 20 years).
Current data from the Financial Services Council shows that there are approximately three million KiwiSaver members, with $ 82.2 billion invested in KiwiSaver funds. But National Capital founder Clive Fernandes has collectively said there must be between 4.5 and 8 times that amount.
Telling people they need to save more might not be enough, he said. Most savers are already doing this.
“We have a looming retirement issue, so a mandatory KiwiSaver will most likely occur,” Fernandes said.
Once people get into the habit of saving, watching her grow, and stepping into “the open space” where they like to save money, contributions can be increased at a comfortable rate, did he declare.
He also suggests people get advice on setting a goal for how much they need to save for retirement – and creating a path to reach it.
The Financial Services Council’s “KiwiSaver at Crossroads” report looked at what Kiwis think about KiwiSaver, the role it plays in retirement planning and where it needs to go in the future.