Focus on decumulation: ANZ

KiwiSaver providers and others in the investment industry will have to start thinking of better ways to manage New Zealanders in the decumulation phase, ANZ’s general manager of wealth products says.

Friday, December 5th 2014, 6:00AM 1 Comment

by Susan Edmunds

ANZ has released research which shows that 40% of KiwiSaver members surveyed plan to invest in term deposits when they reach 65. Another 28% plan to leave their money in KiwiSaver and draw it down from there. Just over 20% want to use their KiwiSaver money to pay off debt and 37% will use it for travel or leisure activities. Just 16% planned to invest the money in shares and 21% of those would look to a managed fund.

Ana-Marie Lockyer said people should be encouraged to seek advice as they neared the end of their working lives. “We don’t want to hand them a wad of cash at 65 and say ‘it’s in your hands now’.”

She said the industry would need to look at options to help people manage their KiwiSaver balances through retirement. “I don’t expect to see the statistics we see today in 10 years’ time. Now, KiwiSaver is a nice to have. Most people have certainty in what they are getting from New Zealand Super and other investments. In the future, KiwiSaver will possible be people’s only retirement savings. We’ll have to start finding better ways to manage that.”

The ANZ survey found consumers did not appear to understand or like traditional annuity products, which they perceived as illiquid, inflexible and poor value for money. “At current interest rates, consumers would be handing over large amounts of money to access a relatively modest ongoing income. Consumers tend to prefer term deposits or property investments. These provide an income stream but also preserve the lump sum and, in the case of property, offer potential capital growth.”

ANZ said it was vital to help educate and inform New Zealanders to achieve a comfortable retirement lifestyle. "Without this encouragement, there's a risk that many Kiwis will 'blow' their savings, leaving them no option but to fall back on the state for financial support."

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Comments from our readers

On 5 December 2014 at 3:42 pm traveller said:

This is an important and somewhat frightening illustration of the poor financial understanding of many/most New Zealanders. Having said that, I wouldn't buy an annuity either, nor put money entirely or predominantly into managed funds. Even later in life, a well constructed share portfolio is the best place for the biggest part of a retirement fund.

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