The largest ever public survey of KiwiSaver has revealed the reasons why people join, highlighted their concerns and discovered what makes them stop saving.
The most popular reason to enrol was the most obvious and the reason KiwiSaver was set up – one in three people said they wanted to save for retirement.
This was closely followed by the appeal of the $1,000 kick start from the Government, which was withdrawn last year.
The survey of 2,200 people was carried out by the Commission for Financial Capability to identify the things that are putting people off joining the scheme, or stopping their contributions, and to find out whether they have made alternative plans for their retirement.
It’s part of Retirement Commissioner Diane Maxwell’s three-yearly review of retirement income policies and the results will help to develop recommendations for the government.
A third of people who’ve never signed up said they had concerns about the scheme, compared with 17% of active members.
Of those concerned non-members, three-quarters said they didn’t trust the government to leave the scheme alone, 64% worried about getting their money back and nearly half had doubts about the providers – either going out of business or their ability to make the right investment decisions on their behalf.
The Commission’s GM Investor Education, David Boyle, said: “There appears to be a problem with a lack of understanding about KiwiSaver that’s putting some people off joining. So, more needs to be done to make sure people know the facts, rather than myths, and can make better-informed decisions around their long-term financial planning.
“The fear may be because of what occurred during the credit crisis: as finance companies collapsed investors’ money in those companies was lost. However, KiwiSaver members’ funds don’t go into the provider’s company, they are invested on behalf of the members into a range of assets like shares, cash, property and fixed interest.”
The research found that most people were aware of at least one of the benefits of being in KiwiSaver, but few people knew about all four of the main ones.
The most well-known was the employer contribution, which was on the radar of 71% of those surveyed. 63% knew you can’t access your funds until you are 65.
Just over half – 53% - knew about the HomeStart grant to buy a first home and just under half (47%) knew about the $521 member tax credit the government gives savers every year. That figure dropped to 27% among non-members.
And a quarter of those who had never joined were unable to name any of the benefits.
David said: “My concern is that people think they have to put the full $1043 in each year before they get the matching $521 member tax credit from the government. But the reality is that for every dollar you put in, the government adds 50 cents up to $521.”
More than two out of three people said they weren’t sure that NZ Super would be enough to retire on.
David said: “The worrying thing is just on 50% of non-members are relying on NZ Super or don’t know how they are going to fund their retirement.”
Of those who have stopped contributing, 40% said it was because they were no longer working and 35% couldn’t afford to contribute.
Nearly 80% of active members said the scheme should be compulsory and, surprisingly, more than a third of non-members agreed.