KiwiSaver has usurped property as the lynchpin retirement asset for younger New Zealanders, according to a new Financial Services Council (FSC) study.
The FSC report published last week – the third in a series – found just under 70 per cent of those aged between 18-34 expect to have KiwiSaver assets at retirement while just 11 per cent forecast they would own a mortgage-free investment property in their post-work years.
In fact, slightly more respondents (67 per cent) expected to have KiwiSaver assets at retirement than a bank savings account (60 per cent). Just 17 per cent of 18-34 year-olds thought term deposits would be part of their retirement asset mix.
About half of those in the same age bracket thought they would own a mortgage-free home in retirement.
But, tellingly, only 30 per cent of younger Kiwis expected to be receiving the government NZ Superannuation pension when they retire.
Overall, the FSC report notes “a resounding lack of confidence among a majority of New Zealanders that they will have enough income for a comfortable retirement”.
“More than half (53%) of those who are not retired are worried by the prospect that they will not have enough weekly income to live comfortably when they retire,” the report says. “Of those worried, 21% are ‘very worried’.”
Retirement income concerns peak for the 35-44 age cohort (where 60 per cent are either worried or very worried) before declining in later years.
The FSC survey also found a groundswell of support for more flexible KiwiSaver contribution options: about three-quarters of respondents favour lifting the maximum contribution rate to 10 per cent from the current 8 per cent and including another intermediate 6 per cent option (in addition to the current 3 and 4 per cent choices).
“While the support was consistent across age groups it was highest among 25-34 year olds with 81% supporting this change,” the report says.
Furthermore, the FSC survey of almost 2,200 New Zealanders carried out 12 months ago found about 70 per cent backed including retirement income projections in KiwiSaver annual reports.
The Ministry of Business, Innovation and Employment (MBIE) is currently considering how to implement the retirement income projection proposal.
“Despite the level of retirement preparation by younger New Zealanders there was a desire from the younger age group to have this information available to them with 70% of 18-24 year olds also in support,” the FSC report says.
On average, respondents aged between 18-34 expect to have saved just over $200,000 in KiwiSaver by the time they retire. Only about a third of that age group say they will have enough savings to fund a comfortable retirement.
The survey also found an increasing appetite for financial advice across the board with almost 70 per cent of all respondents under age 65 interested in using robo-advice solutions.
“While robo-advice will be well supported by all KiwiSaver members, support is at its strongest among 18-34 year olds with 76% expecting they will use robo-advice for one or more KiwiSaver related issues,” the FSC study says.
About 30 per cent of younger Kiwis would use robo-advice to build a full financial plan; a similar proportion said they would use an online advisory service to understand fund choices; and, almost 40 per cent wanted digital help in working out KiwiSaver withdrawal strategies.
Richard Klipin, FSC chief, said in a statement: “The research shows that millennials more than any other age group support financial advice being provided in new ways such as via robo-advice, and want a personalised financial plan.
“So there is a clear wake-up call for industry about the importance of continuing to innovate and improve the ways in which financial advice is provided.”
Horizon Research carried out the survey on behalf of the FSC. The two previous FSC studies – ‘Growing the KiwiSaver Pie’ and ‘Great expectations’ – respectively covered broad public issues around the savings scheme and particular concerns of those already in retirement.