AMP research sheds light on Kiwi saving behaviour
AMP Financial Services
Friday 05 May 2006
Highlighting the generation gap
AMP research sheds light on Kiwi saving behaviour
Concerns about New Zealanders. saving habits have regularly hit the headlines, but new AMP SuperWatch research shows some key attitudinal differences between Baby Boomer1 Kiwis and their children, the "Generation X".
The figures show that 83% of all respondents expected to have a debt-free home, enjoy holidays or travel (72%) or have enough funds to cover their day-to-day living expenses (83%), but 60% of Generation X.ers said they expect to retire at age 60 or less. In comparison, 54% of Baby Boomers expect to be working until age 65 or older, compared to just 40% of Generation X.ers.
"What this means is that there are some real differences in the way Kiwis think about saving and their expectations for retirement which relate to their generational upbringing," says Roger Perry, General Manager Savings & Investment for AMP Financial Services.
"There is, of course, an element of Baby Boomers becoming more realistic as they approach retirement, but our research also suggests that we should consider these generational differences when we try to understand Kiwi attitudes to saving".
As well as the age they expect to retire, the AMP SuperWatch figures show some fundamental differences in the way Baby Boomers and Generation X.ers save. Of those who participated in the AMP survey asked what they were saving for, 69% of the Baby Boomers were saving for retirement or superannuation, but only 51% of the Generation X.ers were.
The Generation X.ers were more likely to be paying off their mortgage as part of their retirement saving (61% Gen X versus 39% Baby Boomers) and, unsurprisingly, had their money in more high risk investments such as shares (28% Gen X versus 16% Baby Boomers) than the more income-conscious Baby Boomers who were more likely to prefer term deposits (30% Gen X versus 46% Baby Boomers).
"Both these results are consistent with the lifestages of Baby Boomers and Gen X. The later are now in their family rearing years when paying off the mortgage is the prime concern. For Baby Boomers, given their children are now leaving the nest, they.re now in their peak savings years," says Mr Perry.
"However, these lifestyles also indicate that Gen X should take on riskier investments, as they have more time to reap the benefits of investing in riskier assets over the long term, whereas the opposite is true for Baby Boomers".
1 Baby Boomers are those born between 1941 and 1960. Generation X.ers are those born 1961 to 1980.
Generation X.ers and Baby Boomers also differ in their view on who should be responsible for providing for their retirement. While 86% of Generation X.ers and 90% of Baby Boomers responded that it was up to the individual to be responsible, 77% of Baby Boomers also felt that the Government should foot some of the responsibility compared with a slightly lesser number of Generation X.ers (67%).
"This highlights that Baby Boomers grew up in an environment of welfare benefits while Generation X.ers haven.t had that, so they are less inclined to expect assistance from the Government into their later years," says Mr Perry.
"Another interesting consideration here is that retirement is an impending reality for Baby Boomers, who in response may start to focus-in on Government assistance to help create a sense of financial security".
In terms of the overall results, 31% of respondents were confident that Government Superannuation would be available for them when they retire. However 70% of all respondents believed that the current level of Government Super would not be enough for them to retire on.
Aucklanders said they were less optimistic they could survive on the Government Super (just 11%). This could be attributed to the higher cost of living in New Zealand.s largest city. Wellingtonians were the most confident that Government Super will be available, at 46%.
In terms of age, 30-49 year olds proved the least optimistic that Government Super will be available with just 19% saying they were confident of a Government provision in their later years.
The AMP SuperWatch figures also indicated continued growth in the awareness of workplace savings. Respondents who reported that their workplace provides a superannuation scheme jumped to 29% vs 21% in July 2005. The survey also noted a big jump in the number of employers offering a workplace scheme who contribute or match employee contributions (83% now vs 60% in July 2005).
"The growth in respondents whose employers offered a workplace savings scheme most probably reflects the impact of the State Sector Scheme that was introduced in 2004, not just for Government employees but for the example it set for other employers who compete in same labour pool "you could argue this put pressure on them to also establish a scheme," says Mr Perry.
"In addition to a growing number of employers offering schemes, we.re seeing an increasing number of people taking up the opportunity to save through workplace schemes, which is particularly encouraging given the introduction of Kiwisaver is les than a year away, " he says.
(Note for editors: The AMP SuperWatch survey was conducted by Colmar Brunton in February 2006 and has a sample size of 500. The margin of error is a maximum of plus or minus 4.5%. All respondents were aged 18 or over.)