- 1 in 3 working New Zealanders feel they have a ‘fairly high’ or ‘very high’ understanding of KiwiSaver – an increase from 1 in 4 recorded in 2012
- However – only 31% of working New Zealanders confidently understand KiwiSaver’s member tax credit benefit, and 53% incorrectly believe employers will automatically contribute to KiwiSaver when they change jobs
New research from Mercer has highlighted that the majority of New Zealanders do not fully understand KiwiSaver, particularly in relation to member tax credits and tax rates. The findings indicate many New Zealanders are missing out on benefits they may be entitled to, but despite this almost three quarters view KiwiSaver as a positive way to save for retirement.
According to Mercer’s research, less than one in three (31%) New Zealanders confidently knew the maximum payment for an annual member tax credit is $521 per year. A further 62% were unsure if this was true or false.
More than half (53%) of working New Zealanders incorrectly believe if they change jobs their new employer will automatically start contributing to KiwiSaver on their behalf. Only 28% knew there is more than one tax rate applied to KiwiSaver investment earnings, with 57% of respondents unsure whether this was true or false.
These statistics are a snapshot from Mercer’s 2014 KiwiSaver Sentiment Index study, which is based on data collected via an online survey of 1,000 working New Zealanders aged 18-65 years. The study has been conducted every two years since the inception of KiwiSaver in 2007. Mercer’s full 2014 KiwiSaver Sentiment Index study will be released later this year.
“Kiwis believe in KiwiSaver, they understand it is a critical savings tool for their retirement, but they clearly don’t properly understand many of the benefits they are entitled to and this is a challenge and opportunity for KiwiSaver providers, the Government and New Zealanders,” said Martin Lewington, Mercer’s Managing Director, New Zealand.
“Low levels of financial literacy and uncertainty about how to get the most out of KiwiSaver will hit New Zealander’s hip pockets in retirement, it’s that simple so let’s fix it now.
“While for the most part, there is a reasonable level of knowledge of KiwiSaver, there is a cloud of uncertainty with many working New Zealanders who are simply unsure in their overall understanding of KiwiSaver and its benefits. Given the Government’s member tax credit is a key incentive offered to assist in helping New Zealanders save, it was perhaps most disappointing to see three in five unaware of this benefit,” said Mr Lewington.
Initial results from Mercer’s 2014 KiwiSaver Sentiment Index study also revealed 74% of New Zealanders believe they have a ‘reasonable’ level of understanding about KiwiSaver and nearly one in three (31%) felt they had a ‘fairly high’ or ‘very high’ understanding of the scheme – an increase from 25% recorded in 2012.
There is strong support for the system, with 71% rating KiwiSaver a ‘good’, ‘very good’ or ‘excellent’ way to save for retirement – a result which has improved since 2012, when 65% reported the same.
“There’s a strong message to government, advisers and key industry leaders to ensure members are receiving the right education and advice about their KiwiSaver.
“To add to this, results also suggest a strong shift towards seeking advice and information from ‘experts in the field’, with fewer mentions of word of mouth sources, such as family and friends – highlighting again the vital role and responsibility both government and employers have towards educating KiwiSaver members,”
“66% would primarily seek assistance from their KiwiSaver provider if they needed guidance – highlighting again the significant role our providers play in educating and advising members about their retirement investments.”
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