…especially among those in their twenties
KiwiSaver is thriving. Most people know by now that more than 2 million — over half the eligible people — are members. But a new report tells more. Far more people are now staying in the scheme after auto enrolment; many are switching from default schemes to something more suitable; and a full three quarters of New Zealanders in their early twenties are on board.
An eye-opening graph in the report — from the Ministry of Business, Innovation & Employment — shows that KiwiSaver is particularly popular with those in their twenties.
The percentage of eligible people in the scheme drops to below 60 per cent by the age of 30, and stays pretty much between 50 and 60 per cent through to retirement.
What about the kids? By age 4, more than 30 per cent are in the scheme. This stays fairly constant until age 16, when the percentage starts its steep rise until the early twenties.
Why the popularity amongst the twenty-somethings? Clearly, young people start new jobs much more often than older people, so they’re more likely to be auto-enrolled. And while 35 per cent of auto-enrolled people in 2009 opted out a few weeks later, that has dropped to just 6 per cent — a remarkable change.
What’s more, a 2011 study found that nearly a third of the people who had opted out of KiwiSaver at least once had since joined. Auto enrolment is bringing people into the scheme, and they’re staying.
The report also shows that young adults are much more likely than older members to be in default schemes. While some young adults don’t know enough to move, others will have realised that the fairly conservative default investments are suitable if they are planning to withdraw money in the next few years to buy a first home.
Still, it’s heartening to read that about 40 per cent of those originally in default schemes have since moved — sometimes to another fund with the same provider but usually to a new provider. This suggests that many people new to investing are taking the trouble to learn about which types of investments are best for them.
It’s not all good news in the report, though. Only 34 per cent of adult members received the maximum $521 tax credit this year, and 25 per cent received no credit at all because they made no contributions. It seems a pity that more aren’t getting all they can from the government.
Also, the investment choices of people in non-default schemes are a bit worrying. About 30 per cent are in each of conservative, balanced and growth funds, with small numbers in other funds.
Given that most people will be in KiwiSaver for many decades, those who aren’t planning a first home withdrawal will probably do better in growth funds. It would be good to see the majority of members taking that option.
Footnote: How do you feel about how your KiwiSaver provider communicates with you?
Workplace Savings NZ, which includes many providers among its members, is asking the public to vote on the quality of their KiwiSaver provider’s communications. The winning provider will receive a People’s Choice Award.
Each voter goes into a prize draw to win one of eight $250 contributions to their KiwiSaver account. Voting closes on November 28. You can vote at tinyurl.com/kiwisaver-com.
It might seem that a big provider is sure to win, just because it has more members. But you’re asked to rate your provider from very poor to excellent. So if you think your provider communicates poorly, say so. Some providers need a nudge about this!
No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.
Mary Holm is a freelance journalist, a director of Financial Services Complaints Ltd (FSCL), a seminar presenter and a bestselling author on personal finance. From 2011 to 2019 she was a founding director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it.