Written by kōura
kōura delved into the country’s KiwiSaver behaviours and surveyed 1,000 New Zealanders. Here's what we found out.
KiwiSaver now has enrolled 3 million people enrolled with a portfolio of over $61 billion. Is it really a success?
A large majority of New Zealander's think that if they are enrolled in KiwiSaver, their retirement is sorted. Most do not realise that the decisions they are (or most probably are not) making today will not deliver the outcomes they expect. With our research, we wanted to go behind the scenes and find out how people were using their KiwiSaver, what their retirement expectations were and how informed they felt about KiwiSaver - read the full report here.
Rather than crossing their fingers and hoping, we need Kiwis to start making active and informed decisions so that they can achieve the objectives they have set themselves.
Our key findings
- Less than half of people are sitting in the type of fund that's right for their risk appetite and objectives. This could cost average Kiwi hundreds of thousands of dollars
- 68% of Kiwis believe KiwiSaver to be a very important tool for their retirement
- The average person contributes 3% to their KiwiSaver account; this will provide a retirement income that is half their current income in retirement
- People do not have access to personal financial advice. Digital advice will, therefore, be a critical tool in helping improve KiwiSaver engagement and outcomes for people
The impact of being in the wrong fund
We looked in detail at the under 45 age category - arguably, the people that will be most impacted by the decisions they make today for their retirement. They also make up 63% of all people enrolled in KiwiSaver:
- Only 53% of people under 45 intending to use their KiwiSaver savings for retirement were in growth funds.
- Of the 47% who were not sitting in growth funds, 67% told us that they wanted to prioritise the growth of their KiwiSaver versus managing volatility - a clear high-risk tolerance indicator
There are 1.8m people under the age of 45 in KiwiSaver with $38 billion invested. Our analysis shows this segment of the population has missed out on over $2.5 billion in returns over the past 2 years.
At the individual level, the difference between being in a default fund and an appropriate set of funds will be hundreds of thousands of dollars by the time a member is 65.
Digital advice will play a key role in KiwiSaver
Most people don't engage with their KiwiSaver account due to a lack of time or knowledge.
The recent Financial Services Council’s report, KiwiSaver 2050 suggested that the use of artificial intelligence and digital advice to help kiwis make plans for their retirement could be a significant breakthrough with improving financial literacy and engagement. The OECD (2017), Robo-Advice for Pensions Report further confirms that user-friendly digital interfaces can facilitate investing and make the process more transparent and accessible. An increased benefit is that the use of algorithms allows investment recommendations to be based on financial techniques and theory-free from the behavioural bias of an advisor, resulting in objective recommendations for the client.
Lowering the barriers to financial advice will be a critical point in helping people make the most out of their KiwiSaver fund. We strongly believe that free digital advice, like the one provided by kōura, will play a key role in improving the financial literacy of KiwiSaver members and help make meaningful informed choices.
The kōura difference
Does KiwiSaver make your brain hurt? At kōura, we keep things simple. We ask you a simple set of questions to understand your goals and assess your risk appetite and then generate a portfolio that's entirely personalised for you. Our calculators allow you to see just how much you will have in your KiwiSaver balance based on what you're saving now and will even give you a weekly retirement income prediction. This enables you to get a realistic picture of much you can rely on your KiwiSaver investment for your retirement and what levers you can pull to give you the retirement you want. Give kōura a try now and see what your retirement will look like.