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Kiwis wake up to their retirement saving reality: Mercer


New Zealand , Auckland


 

Increased education about KiwiSaver over the past three years has resulted in a ‘reality check’ for many New Zealanders about their anticipated retirement savings pool, a new study from Mercer has revealed.

Mercer’s KiwiSaver Sentiment Index Study of over 1000 working New Zealanders, conducted in February 2012, found uptake in the retirement scheme has increased, with just over three in five (61%) participating in a KiwiSaver scheme, compared to only 44% in 2009. Overall satisfaction has also increased: 49% of members in 2009 were either ‘satisfied’ or ‘very satisfied’ with their KiwiSaver scheme, moving up to 54% in 2012.

This heightened focus on retirement saving has, however, led many New Zealanders to realise that retirement could result in a different standard of living, due to a drop in income. The report demonstrates a growing proportion (52%) believe they will be less comfortable in retirement than they are now, compared to only 42% saying the same in 2007.

Martin Lewington, head of Mercer New Zealand, said since the 2009 results, Kiwis have become more astute about the importance of securing adequate savings for retirement.

With this reality check, Kiwi’s are seeing a greater need to stay in the workforce for longer in order to maximise their retirement fund, opening up new opportunities for employers.

“For employers already struggling with skills shortages, the report findings highlight an important opportunity for retaining much-needed knowledge and experience as staff look to stay in the workforce for longer. Employers must take these results on board and cater to the preferences of their older workforce; offering greater flexibility, fewer hours and improved incentives,” Mr Lewington said.

Mercer’s KiwiSaver Sentiment Index Study also found some New Zealanders are still uncertain about KiwiSaver, stemming from concerns around the impact of global market volatility on their savings, and whether the Government will continue to support the scheme in its current form. The results revealed an increased polarisation in attitudes showing Kiwis have more definite views on their attitude towards the scheme, as demonstrated below:



“Overall the study shows there has been a good take-up of KiwiSaver, with the majority of members believing the scheme will be beneficial to them. There has also been a reduction in the anticipated reliance on government funding and aged pension, as more individuals realise that a generous NZ Super scheme won’t be a viable option for our ageing population,” Mr Lewington said.

Introducing the minimum 2% contribution has also helped drive take-up of the scheme, with 41% contributing at this level – up from 29% in 2009. It has also made it more affordable: in 2009 14% said making contributions would have no impact on household budgets - that has risen to 30% in 2012. Conversely, today only 8% see it having a big impact, compared to 17% when it started.

While sentiment towards KiwiSaver is positive overall, there is still plenty of scope for providers and employers to improve New Zealanders’ engagement and retirement readiness. Nearly two in five (39%) claim to have given at least ‘some thought’ and undertaken some preparation for retirement, but nearly half (45%) had made very little (if any) preparations.

Of further concern, the survey showed 32% of participants aged 45+ had given ‘very little thought’ to preparing for their retirement, highlighting the need for increased engagement in this critical age range. In addition, the report revealed men are opting to contribute greater amounts from their salary to KiwiSaver, compared to women.



Overall, the Mercer KiwiSaver Sentiment Index Study shows positive gains have been made in boosting Kiwis’ retirement planning and increase engagement, but the evidence shows even more work needs to be done to ensure members have a comfortable and enjoyable retirement lifestyle.

“Employers and KiwiSaver providers have a responsibility to ensure members and employees are actively preparing for retirement and contributing at greater levels to build their retirement savings. This year superannuation will cost $9.6 billion, or 4.6 per cent of GDP, however, with an ageing population and baby boomers heading into retirement, the Treasury estimates this cost will increase to a staggering 8% of GDP by 2050. Employers, the Government and super providers must educate members about the need to reduce New Zealand’s dependence on the public purse and the serious financial consequences of maintaining the status quo,” Mr Lewington said.

 


Download Mercer's KiwiSaver sentiment index study 

Anticipated comfort level in retirement click here to enlarge

Q. People fund their retirement in different ways  We would like you to indicate how you plan to fund your retirement by showing an estimate of percentages that will make up the resources you anticipate will be available to you on retirement.

 

Anticipated sources of funding for retirement click here to enlarge

- All graphs are sourced from Mercer's KiwiSaver Sentiment Index Study, which is available for download here