One in four New Zealanders say they are likely to increase their KiwiSaver contributions when new legislation takes effect today, according to research by Westpac NZ.
Changes by the Government (effective 1 April 2019) mean employees can now put 6% or 10% of their salary into KiwiSaver, in addition to the existing 3%, 4% and 8% options.
In a representative survey of more than 750 KiwiSaver members conducted in the past month, 27% said they were likely to change their contribution rate as a result of the introduction of the new options.
Of those people showing an intent to change their contribution, 97% said they would opt for an increase.
Westpac NZ General Manager of Consumer Banking and Wealth, Simon Power, says the prospect of hundreds of thousands of New Zealanders boosting their retirement savings is encouraging.
“The 6% option looks like a real winner, with almost half of those planning to change their contribution choosing this rate,” he says.
“Even for someone contributing 4% previously, that’s a 50% increase in the amount they’re putting into their KiwiSaver account each month, which will make a huge difference to their savings at retirement.
“Another 29% say they’ll go for the maximum 10% contribution, which is a great option for those who can afford it. Many people told us they think they need to increase their savings to fund their desired retirement lifestyle.”
In another change, KiwiSaver’s “contribution holiday” will now be known as a “savings suspension” and has been reduced from a maximum period of five years to one, with the option to renew. 46% of those surveyed supported this change, while 18% were opposed.
Other findings suggest more education is needed around KiwiSaver.
“Almost half of people who plan to change their contribution rate do not know they should do this through their employer, while just 35% of people know they have to approach a new KiwiSaver provider if they want to change schemes,” Mr Power says.
“It’s also interesting to note that 38% of those surveyed said they were planning to consider their fund choice and make sure it is still right for them in the next year.
“We encourage all New Zealanders, regardless of their age, to regularly review their savings strategy, including the type of KiwiSaver fund they’re in, to make sure it matches up with their retirement goals. In particular, anyone in a default fund should make an active choice.”
Men appeared to be more confident about their knowledge of KiwiSaver, with just 14% unaware of the type of fund they were in, compared to 27% of women.
“We’re also worried that only 31% of women who have a retirement savings goal in mind think they’re on track to achieve it, compared to 53% of men”, Mr Power says.
“While some of this will be influenced by the ongoing gender pay gap, women live longer on average than men, and will therefore need more money in retirement. It is important to ensure they choose the most appropriate fund based on their appetite for risk and increase their contribution rate if they can afford it.”
The survey also found that 83% of people are concerned NZ Superannuation may no longer be available in its current form by the time they reach retirement age, including 32% who are “very concerned”.
“We see a fair degree of anxiety about what changes to the pension might mean for workers when they hit retirement age”, Mr Power says.
“People might want to consider saving more than they think they’ll need, so they’re able to go into retirement comfortable that they can cope with any financial bumps in the road.”
Nexus Planning & Research was commissioned by Westpac NZ to conduct the research. It surveyed 766 people aged 18 and over who are KiwiSaver members (across different schemes) in March 2019. The margin of error is +/- 3.5%.