KiwiSaver treated like a bank account, not investment

Three-quarters of all KiwiSaver members have no idea how much money they will have in their accounts when they reach retirement, a new survey shows.

Monday, April 11th 2016, 10:27AM

The survey of 781 members, commissioned by Kiwi Wealth, shows 77% of people do not know what their account will be worth when they hit 65.

But more than half estimate they will need between $400 and $600 a week to live on, after tax.

Another 27% did not know what type of fund their KiwiSaver account was in and 31% had never reviewed it. Women were more likely to have not made any changes.

Almost 40% of those aged under 25 did not know who their provider was.

More than 60% expected to get NZ Super when they retired.

Joe Bishop, Kiwi Wealth head of retail wealth and marketing, said there was a large gap between people’s retirement income expectations and the amount they needed to save to achieve it.

“For an initiative designed to encourage retirement savings, it’s alarming that 77% of KiwiSaver members don’t know how much will be in their account when they retire.

“It’s likely that many are seriously overestimating how much it will be, and seriously underestimating how much they’ll need to have the retirement lifestyle they hope for,” he said.

“Half of the KiwiSaver members surveyed thought they would need $400-$600 a week to get by when they reach retirement age. Massey University research shows that even for a ‘no frills’ retirement, someone living in a metropolitan centre will need $490 a week.

“Current New Zealand Superannuation for a single person is around $370 a week, so there is a shortfall that needs to be bridged by KiwiSaver.”

He said the survey showed many members were not taking enough action on their KiwiSaver accounts and could be missing out on money in retirement.

“The prevailing sentiment appears to be that many people approach their KiwiSaver accounts like bank accounts when they should be thinking about them as investments. Many of these accounts are lying ignored in default funds which may not be performing as well as other funds more aligned to the customers’ risk profile and investment timeframe.

“Too many KiwiSaver members are short-changing themselves. They need to be more involved with their investment and make informed decisions,” Bishop said.

“The onus, too, must be on KiwiSaver providers to engage more with their customers and help them make good decisions for their investments. That’s the best way for KiwiSaver members to increase their wealth.”

Tags: KiwiSaver