Infometrics On Potential Impacts of Kiwisaver - Key Points
For Immediate Release
Infometrics Report on the Current And Potential Impacts of Kiwisaver
Key Points from a report from Infometrics titled The Potential Impact of KiwiSaver on the New Zealand Capital Market, which was commissioned by the Financial Services Council (FSC) are:
• If KiwiSaver can achieve closer to universal coverage, say 80 percent of the workforce and contributions move up to 10 percent, (5 percent from employees and matched 5 percent by employers) the KiwiSaver fund would grow from its current level of $13 billion today to $731 billion by 2066.
• The impacts on the economy for New Zealand would be substantial and include investment in new jobs, an improvement in worker productivity and wage rates, slightly lower interest rates and a more resilient economy during recessions.
• Those starting work today would also get twice the pensions they would be entitled to currently from just NZ Super when they finish their working careers. They would look forward to a comfortable lifestyle, compared to those retiring today.
• To reach the $731 billion goal new KiwiSaver enrolees would need to increase their contributions by 1 percent a year to reach a total of 10 percent. This is an extra half percent a year each from themselves and their employer, over 10 years from 2015 to 2024.
• Existing KiwiSaver members whose contributions currently average 5 percent of income rising to a minimum of 6 percent this year, would only need to increase contributions by 1 percent a year for four years to achieve a 10 percent contribution rate for the rest of their working years and reach the $731 billion goal.
• The average KiwiSaver contribution at 5 percent is well below other countries and way short of what is needed to provide people starting work today with a comfortable retirement income for their expected longer retirement.
• Australian employers, who currently pay 9 percent, will move up to 12 percent over the balance of this decade.
• Two million New Zealanders and some 50 percent of the workforce are currently signed up to KiwiSaver.
• Existing KiwiSaver funds are already creating a significant boost for younger New Zealanders purchasing their first home. In 2012 KiwiSaver funded deposits on 10,000 first homes, worthy around $3 billion.
• Money is being invested into fast-growing New Zealand businesses and helping those businesses maintain a New Zealand base and ownership.
• KiwiSaver is creating a cushion against future economic downturns by ensuring capital continues to flow into companies because the contributions don’t stop being invested in response to short-term events, such as a share market downturn.
The Financial Services Council (FSC) has funded the research to stimulate further discussion. It will test New Zealanders appetite for a universal KiwiSaver Plus savings scheme with market research.
About the Financial Services Council
The Financial Services Council has 22 member companies and 17 associate members. Members are managing nearly $80 billion in savings and provide financial services to more than 2 million New Zealand investors and policyholders.
If you have a life insurance policy or a KiwiSaver account then there is a more than 80 percent chance it is managed by a Financial Services Council member. Last year the FSC report Pensions for the 21st Century: Retirement Security for Younger New Zealanders kicked off renewed debate about how to provide most New Zealanders with a comfortable retirement income when our longevity after 65 years is growing by two years every decade.
Full Infometrics Report: