Access to KiwiSaver will be opened up to over 65 year olds to join from July 1. Photo / Lewis Gardner
Access to KiwiSaver will be opened up to over 65 year olds to join from July 1. Photo / Lewis Gardner
More than 500,000 New Zealanders will be able to join KiwiSaver due to law changes from Monday.
About 2.9 million people already belong to the retirement savings scheme, but until now, over-65-year-olds had been locked out of joining.
It is one of a handful of law changes which take effecton July 1.
There are 747,900 people aged 65 and over in New Zealand, according to Statistics New Zealand and research by the Commission for Financial Capability shows nearly one in three (29 per cent) of over-65-year-olds are already in KiwiSaver.
Ten years ago, retirees could get 8 per cent interest just by putting their money in the bank, but term deposit rates have fallen to around 3 per cent or less.
"Anybody sitting in bank term deposits and who thinks it will go back to 8 or 9 per cent is doomed to disappointment," he said.
"These rates are the new normal."
Hawes said moving money into KiwiSaver not only allowed people to access a potentially higher return but also spread their money around different types of investments.
"With KiwiSaver, you have got a ready made diversified fund that is well regulated and cheaper than other managed funds."
He said a lot of retirees had $100k or $200k in savings which was too small an amount to get access to professional financial advice and KiwiSaver was a convenient way of getting that.
The Government's Smart Investor website shows the average fee for a conservative KiwiSaver fund is 1.1 per cent, or about $110 a year, for a $10k investment.
For a non-KiwiSaver managed fund, it is 1.23 per cent, or around $123 a year, for a $10k investment.
Massey University's Dr Claire Matthews doubts many older New Zealanders will join KiwiSaver. Photo / Supplied
But Claire Matthews, a KiwiSaver expert at Massey University, said she expected only a small number of over-65s to sign up.
"A lot of those people aren't employed. They have already got their finances set up."
She was also cautious about people moving their money from term deposits into KiwiSaver.
"It is important they have enough information and advice to understand the risks and ensure it is right for them in terms of their goals."
She said it could also potentially have a detrimental impact on the rest of the managed fund industry.
"Not because I would expect people to move their money into KiwiSaver, but because it will reinforce people staying in KiwiSaver."
That could mean more people leave their money in KiwiSaver rather than moving it to other managed funds.
The other change from Monday is that new members will no longer be locked in to the scheme for five years.
Members between the ages of 60 to 64 (inclusive) who enrol on or after July 1, 2019 will be able to withdraw their KiwiSaver funds at 65.
Financial adviser Martin Hawes, who sits on the investment committee of KiwiSaver provider Summer, believes over-65s will sign up to KiwiSaver. Photo / Supplied
But they will also miss out on getting the government contribution for a minimum of five years.
Hawes said he was happy for the change to come in as people getting both the KiwiSaver government contribution and New Zealand Superannuation were potentially double dipping.
But Matthews questioned the need to change it.
"I don't think it was a major detriment."
She said given the high membership of KiwiSaver, most people would probably be in it for more than five years by the time they got to 65 and the change was more to make administration easier.
