Around half of New Zealanders still don’t fully understand KiwiSaver but the majority has a strong appetite to understand more about the scheme. Research by KiwiSaver Provider, Mercer, reveals 41% of KiwiSaver members believe they have a low level of knowledge about the scheme but 82% have a high level of interest in learning more.
According to Mercer, two of the most effective actions people can take in 2014 to improve their retirement savings are:
- Get a clear picture of how much they expect to have in retirement compared to how much they will need
- Better understand what they are entitled to and maximise the benefits available to them within KiwiSaver
Mercer’s New Zealand Managing Director, Martin Lewington, said, “New Zealanders can, and should, ‘stress-test’ their retirement savings against life’s variables such as career breaks, changes to contributions, and sharemarket volatility. Stress testing savings helps people prepare for their retirement in a more effective way by not just estimating a lump sum at retirement but also showing how this equates to an income after retirement.”
“A large number of KiwiSaver members are either not actively contributing, or not entirely benefiting from the incentives that are on offer. This means KiwiSaver providers need to work harder to help their members understand their options, and how they can maximise their retirement savings,” said Mr Lewington.
“If 2014 brings with it a new job, promotion, or pay rise, there is even more of a reason to start thinking about your retirement plans, and start by reviewing your KiwiSaver contributions. With compound interest, a small increase in contributions now could have a significant impact later down the track in retirement,” he said.
The bottom line is that the sooner people take an interest in their retirement savings, the better and potentially longer their retirement will be.
Top five tips to make the most out of KiwiSaver in 2014:
- Avoid seeing KiwiSaver as a lump sum: Saving for retirement should be about guaranteeing a sustainable income in retirement that allows you to live the lifestyle you desire, for as long as you need it to. Thinking about KiwiSaver as a lump sum, rather than how to use it as a regular income in retirement, runs the risk of the money running out at a time when you need it most.
- Don’t focus on short-term returns: For most of us KiwiSaver is a long-term strategy and a tool to create income over a long-term period. Therefore, long-term returns are more important than short-term.
- Start planning your future lifestyle: Kickstart 2014 by jumping online to predict the future. Online planning tools such as Mercer’s retirement income simulator allow you to estimate how much you may have in retirement, and what you need to do ensure you have your desired lifestyle when the time comes to retire.
- Don’t assume that history will repeat itself: Past fund performance is not a guarantee of future success. Many fail to consider whether their current investment returns are sustainable over a 10 or 20 year period and fall into the trap of remaining in a high performing fund, which doesn’t meet their long term needs or make the most of their stage of life.
- Know what you’re entitled to: The new year is a good time to do a quick review of your contributions to ensure you are receiving the Member Tax Credit – its money for jam and people are missing out.
“Many New Zealanders are not getting the most out of KiwiSaver during their working years to successfully set themselves up for their desired retirement lifestyle and one in three KiwiSaver members are unsure of what to do with their KiwiSaver savings when they reach retirement according to our research,” said Mr Lewington.
Mercer is a global leader in talent, health, retirement and investments. Mercer helps clients around the world advance the health, wealth and performance of their most vital asset – their people. Mercer’s 20,000 employees are based in 43 countries and the firm operates in over 140 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 55,000 employees worldwide and annual revenue exceeding $12 billion, Marsh & McLennan Companies is also the parent company of Marsh, a global leader in insurance broking and risk management; Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; and Oliver Wyman, a global leader in management consulting. Follow Mercer on Twitter @Mercer_NZ