KiwiSaver: The experts' views

Mary Holm

KiwiSaver commentator Mary Holm says many young people were interested in the scheme because it helped them save for their first house.

It's because of this feature that she doubted the first home withdrawal, up to $5000 a member, would ever go.

"A key reason it has done as well as it has is because people are automatically enrolled in it. When you look at the data, a huge number of people who are automatically enrolled have stayed in, which is a really good feature. It means that people that might otherwise not have got round to it have been pushed in."

Holm said about 37 per cent of people over 18 were now enrolled in the retirement savings scheme.

Another positive feature about the scheme was members' focus on reducing debt, she said. "Research had shown that people are more likely to pay off debt sooner if they are enrolled in KiwiSaver.

"We shouldn't underestimate the fact that people start thinking, 'I'm in control. I'm starting to do something for my long-term financial good' ... That [is] happening, and it's a positive side-effect of KiwiSaver."

Holm said this trend would get stronger as accounts grew. Research in Australia had shown that once accounts reached $20,000 people became a lot more interested in what that money was doing.

But one area KiwiSaver needed to improve was how fees were disclosed, she said. "I would like to see ... more transparency about fees, which in same cases are still pretty high."

David Boyle

ING KiwiSaver distribution head David Boyle said the greatest challenge for KiwiSaver would be to constantly reinforce the benefits of the scheme and to encourage long-term saving.

Boyle said despite the scheme's enormous success, many New Zealanders were not taking advantage of it and many were taking contribution holidays.

People who aren't enrolled miss out on government tax credits - which match contributions from members of up to $1043 a year - and employers' contributions, which are also tax-free.

"KiwiSaver is only part of the pie for people to become financially independent but it's a very good start. It's also good education to get people to understand how features [such as compound interest] work.

ING reported at the end of August it had 24 per cent of the market, 361,000 people, totalling about $1.5 billion under management.

"It is without doubt the best savings product in New Zealand from a retirement perspective because of the incentives and the contributions. People are getting into the habit of regular saving, and we haven't had that in New Zealand for a long time."

Boyle said the ability to take your scheme with you wherever you worked was an amazing feature that the Australian schemes did not have.

"You know those contributions will continue irrespective of where you are employed. You know where it is and where it is growing."

Stewart McRobie

ASB relationship banking chief executive Stewart McRobie said the popularity of the scheme had surpassed market expectations and his own predictions.

The bank has about 250,000 members of New Zealand's 1.5 million enrolled savers.

McRobie said compulsory retirement saving in Australia had been a phenomenal success and had created a "huge legacy" for the population's financial independence from the state.

"There is a huge depth of wealth in Australia now, a wealth that has deepened capital markets. There is an opportunity for New Zealand to do that here. There is a pool of capital available [through KiwiSaver] that wouldn't have been here before, money to invest into secondary markets. But our capital markets are nowhere near as deep as they need to be. There are still an awful lot of small accounts, people who joined to take advantage of member tax credits."

McRobie said the true success of the scheme would be to change the mentality about retirement saving by getting people to regularly contribute through their salaries to the scheme.

On average people contribute 4 per cent, 2 per cent through their employer and 2 per cent through their salary. In Australia the average contribution sits at about 9 per cent.

McRobie said 80 per cent of funds under management were in 10 providers, with the remaining 20 per cent in much smaller funds likely to consolidate over the next decade.

Glenn Ashwell

Fisher Funds general manager Glenn Ashwell said the government tax credits were so good that unless you genuinely couldn't afford the scheme, you would be "nuts" not to join.

Ashwell said KiwiSaver was helping address financial illiteracy in New Zealand and getting children involved in the scheme would only benefit them and the country in the long run.

"KiwiSaver is a fabulous initiative for the country in a number of ways. One of the things we see [through KiwiSaver] is a lot of people we otherwise wouldn't engage with. Why that's important is we get to talk to people about how we are investing their money, and people start taking an interest. We now have kids investing with us that are getting monthly newsletters and are taking an interest in what a share is and what interest means.

"We talk about financial literacy a lot in the country and that it's a problem, but I think KiwiSaver is the best way to try and solve that."

Ashwell said the increase in financial literacy and the spin-off benefits of KiwiSaver were very exciting for New Zealand.

"The structure of KiwiSaver is really good because it is money that people don't really miss.

"It comes out of your pay. You still pay the bills and then you get a nice surprise. For most people there just is no reason not to be in KiwiSaver."