FSC Welcomes 7th Birthday for KiwiSaver
FSC Welcomes 7th Birthday for KiwiSaver and Points to What More Needs to Be Done
KiwiSaver has been the New Zealand’s most successful savings innovation in the last hundred years says the Financial Services Council, CEO, Peter Neilson. Speaking on the 7th launch of KiwiSaver, he said there were a number of reasons it has outperformed what even its most enthusiastic supporters expected.
The reasons for this are:
• For those who find it hard to save KiwiSaver made it easy to both enrol and put the money safely away before it could be spent.
• The kick start incentives and matching employer contributions made it a “no brainer” for most New Zealanders.
• As KiwiSavers see their balances steadily grow, New Zealanders are understanding the benefits of saving a little each week for a long time to build a retirement nest egg and increasing their financial literacy while it happens.
• More than 15,000 New Zealanders have benefited from using KiwiSaver to purchase a first home and many more plan to do so.
We now have more than 2.3 million New Zealanders in KiwiSaver more than three times the Treasury’s $700,000 initial estimate but we can make it even more successful:
• Most people are currently saving at the 6% rate (3% from themselves and 3% from their employer). To fund a comfortable retirement on about 2 times the NZ Super pension income ($282 after tax for each person in a couple) would require the contribution rate to go to 9% or higher.
• If KiwiSavers defaulted into a balanced or growth fund rather than a conservative one and the over-taxation of KiwiSaver funds was addressed, the contribution rates required to fund a comfortable retirement could drop to 7.6% or even 6.1% including for someone on a modest income.
Only 7.9% of New Zealanders (Horizon Research, October 2013) believe they can live comfortably on NZ Superannuation alone. It is now up to the politicians to decide how to increase the coverage and contributions into KiwiSaver.