Constant tweaks confuse KiwiSaver Scheme

While the KiwiSaver Scheme has been witnessing increasing popularity and membership among both employers and employees, its implications and benefits are still an enigma, according to experts.

A Financial Services Institute of Australasia (Finsia) research said that there was a need for automatic enrolment of all New Zealanders into the KiwiSaver Scheme.

Russell Thomas, Chief Executive of the Institute said consumer perceptions of the Scheme were changing and that KiwiSaver has been subject to many legislative changes since its introduction in 2007.

Differing perceptions

He quoted an UMR Research, which conducted 1008 online interviews based on a survey instrument designed by Dr Claire Matthews, Director of Planning at Massey University’s Centre for Financial Services and Markets (Indian Newslink, May 15, 2012). The research compared findings of consumer perceptions of KiwiSaver conducted in 2011 including the importance of saving for retirement; sources of financial advice; and attitudes to changes announced in the 2011 budget.

Dr Matthews said that the survey tested New Zealander’s levels of engagement with KiwiSaver.

“As expected, there is a relationship between the size of a person’s KiwiSaver account and their level of engagement in it, but the level at which that engagement kicks in is lower than expected, being in the $2501–$5000 band,” she said.

The Survey found that people had still not properly understood some elements of the Scheme and that there was a lack of awareness.

Low awareness

Dr Matthews said that many people were unaware of the opt-out option, contribution, holiday provisions and whether the scheme applied to the self-employed.

She found significant age and gender-based differences in engagement with retirement savings, with men (63%) more likely to have other investments and savings to help them in retirement than women (47%).

Similarly, 18–19 year olds were less likely to hold other savings and investments (9.1%) than 60–65 year olds (79%).

“The increase in the percentage of New Zealanders that support KiwiSaver membership being made compulsory shows that the government should act on its commitment to consult on automatic enrolment for all New Zealanders who are not already in KiwiSaver,” Dr Matthews said.

Note: The Financial Services Institute of Australasia is stated to be the only professional association representing the entire spectrum of financial services throughout Australia and New Zealand. Its reach extends to thousands of individual professionals working across the broad categories of banking, wealth management and capital markets.

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