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Kiwis getting savvier about retirement savings

New Zealanders are becoming much more engaged with KiwiSaver as their balances creep up, says ANZ’s head of wealth, John Body.

Tuesday, March 18th 2014, 12:56PM

by Susan Edmunds

The bank today released its latest Retirement Savings Confidence Barometer, which showed that people were a lot less confident about reaching their savings targets when they were adjusted for inflation.

The bank has changed the way it asked survey respondents about their level of confidence.

Instead of asking how much people wanted in addition to the pension in retirement, and then working back to show how much they needed to save to achieve that, then asking how confident the saver was of getting there, this time the amount they need to save as a lump sum was inflation adjusted.

Then, the same questions about confidence were asked.

The survey found only 39% of those with a retirement savings target were confident they would get there once the lump sum targeted was adjusted for inflation. That’s down from 50% in October.

But they were willing to take action to fix the problem.

A quarter of male respondents and 32% of female said they would increase their KiwiSaver contributions after seeing the impact of inflation on their goals. Another 58% said they would not change immediately but would need to save more in future.

“The results show that many people have not factored inflation into their savings plans. If you’ve got more than 10 years before you retire, then you’ll need to think about how inflation will impact the buying power of your savings," Body said.

Confidence fell most sharply among those aged 24 to 44. Only 38% were confident compared to 54% in October.

People earning more than $100,000 were also less confident, down from 66% to 50%.

ANZ calculates that a 30-year-old earning $50,000 and contributing 3% using a life stages investment approach could have enough in their account to deliver $200 a week in 35 years’ time when adjusted for inflation.

Body said people needed to be putting more aside – “the more contributions the better” – but also to make sure they were in the right fund for their circumstances. Returns above inflation are likely to be higher for growth and balanced funds than for default conservative options.

“One of the ways to beat inflation over the long-term is to be in the right fund.”

He said advisers should be having the conversation with investors about what they needed to do to get to the required amount in retirement, taking into account the fund the investor was in.

He said it was also incumbent on providers to provide information.

But he said people were becoming a lot savvier. “Think about where we were two years ago versus where we are now. Retirement savings are on the minds of most people. We’re seeing action, people are engaging with KiwiSaver, they see their balances have grown to something reasonable and they’re starting to make decisions.”

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ANZ 5.19 4.05 4.05 4.49
ANZ Special - 3.55 3.55 3.99
ASB Bank 5.20 3.89 4.05 4.39
ASB Bank Special - 3.39 3.55 3.89
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China Construction Bank Special - 3.19 3.19 3.19
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Credit Union Auckland 5.95 - - -
Credit Union Baywide 5.65 4.75 4.75 -
Credit Union North 6.45 - - -
Credit Union South 5.65 4.75 4.75 -
Finance Direct - - - -
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Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
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HSBC Premier LVR > 80% - - - -
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HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
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Kiwibank ▼5.15 4.20 4.30 4.64
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Kiwibank Special - 3.45 3.55 3.89
Liberty 5.69 - - -
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TSB Special 5.29 3.39 3.55 3.89
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