Peter Urbani, from KnowRisk Consulting, has been looking at the retirement projection calculators offered by KiwiSaver providers and other institutions, and said they differed significantly.
“If you put the same inputs into 13 different KiwiSaver calculators ranging from Sorted to the banks and asset managers you get 14 different results.”
Using the example of a 35-year-old earning $75,000 a year with a current balance of $25,000 and contributions of 3.5%, calculators said they were on track to receive anything from just under $250,000 via the Financial Markets Authority through to $276,651 by Sorted’s calculation.
“The tools I build for people to use, they don’t give advice but I do try and get them right,” Urbani said.
“I was just having a look and I did notice there was a big disparity… obviously there’s a critical need because New Zealand started so much later than Australia, there’s a funding gap that’s quite far behind so it really comes down to what contribution rate is necessary and what, if anything, the government does to make it more urgent.”
He said a few calculators had not updated their NZ Super tables from 2025 to 2026 values. Some were using different PIRs and a couple were using non-standard fund return expectations, he said.
But people needed a clear picture to be able to plan how much more they would have to contribute to get to their desired outcomes.
“With current balances at around $10,000 median …and current average age 40, contribution rates are going to have to rise to around 18% for everyone to be able to retire comfortably and not outlive their money.”
He said the “straight line” method used by the calculators to show an investor’s likely experience was inadequate.
“To keep it simple they show the one line where you have accumulation and decumulation.
“That’s fine from a simplicity point of view but the problem is that the input assumptions, which they don't even show on the calculators …they've got specific fund return expectations and also implicitly volatility and things like that, all of which change dynamically per fund and per year.
“So that straight line is going to be a wriggly line and because it wriggles, some people are going to get the top line and some people are going to get the bottom line, depending on when they enter.
“And the range between those two is what really matters, because if you want to be very sure you're not going to outlive your money, you want to look at one of those lower confidence bands … let's say it gets you to $500,000, which is probably a generous number for New Zealand, there's some people who are going to be getting less than half of that and some people are going to be getting not quite twice, but sort of $700,000-odd. So, if a lot of people are getting less than half of that, obviously, they're going to outlive their money.”
He said the Government should take some policy decisions to encourage more people to save, whether that was tax breaks or credits, or other measures.
“It's got to come from somewhere. Otherwise either the retirement age will have to increase, which I think is going to happen anyway, or people will have to start cutting back on their spend in retirement. The real thing is to get total contribution rates up.
“If you start saving immediately in your first job and you put away 10 percent from age 20, 25, you really don't have to worry about it.
But the reality is nobody has that discipline and life gets in the way… everybody starts later than they should. And the effect of starting later is the slope of the line to where you want to get to gets steeper.
“So it's really about getting those balances right. The sad reality most people are not going to have a 90% probability of not outliving their money because of the skewness of income distribution in the country. And that's a universal thing.
“So basically if you think about it, ‘I want X amount’ and you're probably going to miss it, but let's say that's your target. If you're at 80% of that target, you're generally in pretty good shape. But once you're underfunded, it becomes harder and harder to make up that gap.
“You either have to cut your cloth for your circumstances… or you increase your contributions while you still have time.”
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