KiwiSaver yet to prove its worth

There is potential for KiwiSaver to grow the retirement savings pool but it is unclear whether that has been the case so far according to industry experts.

Tuesday, September 7th 2010, 10:50PM

by Jenha White

Speaking at the Workplace Savings conference in Christchurch Inland Revenue senior evaluator Katherine Meerman says it is an important but unanswered question.

"Because if KiwiSaver isn't growing the retirement savings pool over and above what would have been the case, then what has been the point?"

She says there is some indication of the potential for growth in savings, but there are also indications of substitution behavior.

She says in terms of members, the pool has had relatively steady growth for the last two years, with an average of 30,000 people joining a month and membership at just under 1.5 million which represents 38% of the total eligible population.

Inland Revenue data shows over one third of members (37%) have joined through automatic enrolment, with two thirds (63%) opting in.

Meerman says without KiwiSaver 38% of households would have been unlikely to save for retirement.

From the funds perspective, in the three years to July 2010 Inland Revenue passed $6.6 billion in funds to providers for investment.

Meerman says in the big scheme of things KiwiSaver represents a growing but still relatively small percentage (9%) of the value of total funds under management. Of the value of superannuation savings KiwiSaver makes up close to 30%.

Meerman says taking Inland Revenue data into account, she has a foot in both camps as to whether KiwiSaver is growing the retirement savings pool or not.

This sentiment was matched by BT Funds Management senior product manager Sharon Mackay who says most KiwiSaver members are contributing 2% which is a great start, but not enough for retirement savings.

She also believes too many people are in conservative funds which is not necessarily the best level of risk for their profile.

However ASB head of group investments Greg McAlister believes the retirement savings pool is seeing growth.

He says ASB as a default provider, has 252,000 members and as of last month $1.23 billion in the fund which is a number well beyond its expectations. He says overall KiwiSaver numbers are also beyond initial treasury and provider forecasts.

Jenha is a TPL staff reporter. jenha@tarawera.co.nz

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Compulsory KiwiSaver not necessarily silver bullet »

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