KiwiSaver's ripple effect

KiwiSaver is being tipped to give financial advisers an indirect boost.

Monday, November 24th 2014, 6:00AM

by Susan Edmunds

The Government savings scheme is yet to pay off directly for many financial advisers because balances are not high enough to make commissions significant.

But ANZ head of wealth John Body said the scheme was generating spillover into other investments, which could help advisers.

A Treasury Working Paper released this month argued that KiwiSaver had not improved the wealth position of New Zealanders. It said the accumulation of net wealth by members of KiwiSaver was $16,000 less than the comparable accumulation by non-members over the period it analysed.

It said it seemed KiwiSaver members were building savings by diverting their money from other retirement savings options. The report analysed an eight-year period to 2010.

But Body said the situation now was very different to before 2010, when the study was done. “The average balance is now nearly $10,000, against $4000 in 2010.”

Compulsory contributions had increased and a number of superannuation schemes had closed, channelling retirement savings to KiwiSaver, he said.

“This is slightly outdated and doesn’t reflect what’s happening now. Is KiwiSaver making a difference? If you talk to the average plumber, teacher or office worker, they’ve now got $5000 to $25,000 in KiwiSaver and are thinking about their retirement. It’s definitely making a difference. I don’t buy the argument that they would have been anyway,” he said.

KiwiSaver had led to two million New Zealanders being invested in unit trusts and membership of the scheme was leading to increased confidence in managed funds, which was flowing on to improved confidence in the sector in general, Body said.

“People are realising that managed funds are not that scary and perform reasonably credibly.”

Those who wanted to save another couple of hundred dollars a month but did not want that money to be locked were looking at other options within the sector where they previously might not have, he said.

“We’re starting to see that now, more interest in our unit trusts from people wanting to run them in parallel to their KiwiSaver accounts.”

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