The Retirement Income Interest Group (RIIG) of the New Zealand Society of Actuaries has called for better data-led policies to improve KiwiSaver contribution levels and drawdown behaviours.
In its second study based on a large KiwiSaver dataset, RIIG found KiwiSaver would boost the retirement income of New Zealanders as intended.
“Future KiwiSaver balances at age 65 will follow the picture of current balances, with a cluster of helpful, if modest, balances for most and some high balances,” the report says. “Leaving aside the ongoing non-contributors, a quarter of contributing current 50-year-olds are estimated to have a KiwiSaver of less than $70,800 at age 65 and three-quarters less than $201,800 in present day values.”
However, the RIIG study says the government should consider new policies to encourage non-contributing members to recommence saving as this group will derive zero, “or even negative real growth expected from their current balances”.
“The median balance at age 65 for persistent non-contributors is estimated to be $6,200 in present day terms for current 45-year-olds and $5,400 for current 59-year-olds,” the paper says. “Low investment returns enable savings to just about keep pace with inflation but not much more. For those invested in the most conservative funds with no growth assets, negative real growth in the balance is likely as fees and inflation outstrip investment return.”
But with most KiwiSaver members expected to accrue only middling balances by age 65, the RIIG report says the universal NZ Superannuation (NZS) pension must remain in place.
“We believe that means-testing NZS would lead to complexity and worse outcomes as people become reluctant to save in case they are penalised,” the RIIG study says.
As per previous reports, the current actuarial analysis found most KiwiSaver members won’t be able to afford personalised advice based on retirement account projections, creating the need for standardised, government-approved guidance.
“A framework, including regulation, should be put in place to supply generalised guidance on how to draw down from KiwiSaver,” the RIIG paper says. “The guidance should be simple, readily available and consistent across multiple sources.”
Furthermore, the new report reiterates a call for the Financial Markets Authority and the Retirement Commissioner to commit to a “whole-of-market data collection and analysis on a regular basis” – either annually or to coincide with the triennial retirement system review cycle – to back KiwiSaver policy decisions.
And the RIIG report also offers some final mean-as mathematical advice for KiwiSaver observers etc.
“Because of the skew in the distribution, the average balance is not a good indicator of the typical balance. The average is always higher than the median, which better represents the typical KiwiSaver balance.”
The ‘Future KiwiSaver balances and implications for retirement income policy’ study is the second based on a large database of members aged 45 and over.
While published under the New Zealand Society of Actuaries banner, the findings represent “the collective personal views of the members of RIIG”.
Current RIIG members include Alison O’Connell, Christine Ormrod, Ian Perera (convenor), Fraser McKay, Kelvin Prisk, and Simon Ferry.