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KiwiSaver increasingly retirement saving vehicle of choice

An increasing amount of New Zealanders are relying on KiwiSaver as their sole source of retirement income, according to the latest ASB Investor Confidence survey.

Wednesday, November 9th 2011, 5:00AM 1 Comment

by Benn Bathgate

 

The survey - which asks investors to rank the investment class that offers the best returns - found KiwiSaver second equal with investment property as the investment class offering the best returns.

Investors rated term deposits as the best investment choice, with 18%, while KiwiSaver and rental property were deemed the best investment choice by 13%.

The survey found an increasing amount of New Zealanders are turning to KiwiSaver as their main source of retirement funding.

"This is the highest ranking KiwiSaver has achieved since the survey began," said ASB head of private banking and wealth management Jonathan Beale.

He said KiwiSaver had recovered from a fall in popularity in the last quarter in the wake of the Budget 2011 changes to the scheme.

"Our results also show that almost half of respondents, a record 47%, are currently using KiwiSaver. Out of those using or intending to use KiwiSaver, a total of 64% say it will be their primary source of retirement - again the highest level we've seen in this survey."

Beale said the scheme had been an "astonishing" success as its grows into the dominant retirement savings vehicle just four years since its launch, and he predicted that as balances grow so will investors interest in the scheme.

However, he cautioned savers that KiwiSaver alone may not be enough for retirement, especially if contribution levels remain at a relatively low level.

"I do think people need a bit of reality. If I'm paying 2% and my employer puts 2% in, you're not going to be having luxury holidays every year in retirement," he said.

"It's a simple equation - the more you put in the more you'll have later in life."

His comments were echoed by Retirement Commissioner Diana Crossan.

She said that while NZ Super meant KiwiSaver wouldn't be the sole income for those in retirement, she was concerned about the low level of contribution.

"What we've got to do is help them understand that 2% isn't going to do it," she said.

Term deposits retained the top spot among investors for the sixth consecutive year, with bank savings accounts and managed investments in equal third place on 10%, with shares the last of the six asset classes on 8%.

 

 

 

 

 

Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to benn@goodreturns.co.nz

« KiwiSaver fee focus a ‘red herring’KiwiSaver mismatch a 'huge challenge' for advisers »

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Comments from our readers

On 10 November 2011 at 12:49 pm Peter said:
This shows NZ's lack of financial sophistication if 18% of those surveyed believe term deposit is the best form of investment. It certainly is for short term funds which are likely to be used in the next 3-5 years, but history tells us, time and time again, that equity provides the best potential return over the long term. Your term deposits maybe safe from reducing nominally, but inflation will just eat up the value over time. Equities on the other hand, whilst volatile in the short term, have proved to be inflation busters and real growth providers, it is just the case of spreading across different markets, countries etc and making sure you take your profits and not be greedy.
If this was not the case, why would businesses borrow from the banks and pay high interest, simply because over the long term they know that they will make more money. No different for the individual, except he/she can get a share of that profit, by buying into those companies' shares. Not rocket science
Commenting is closed

 

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