KiwiSaver was officially designed to “encourage a long-term savings habit and asset accumulation by individuals who are not in a position to enjoy standards of living in retirement similar to those in pre-retirement”, according to the governing legislation.
But it’s not there yet: not for everyone based on the findings of a new Public Trust (PT) survey.
The PT poll of some 1,000 or so New Zealanders found about one-fifth of respondents were not worried about wealth protection due to asset-poverty. However, almost 60 per cent of this cohort also held KiwiSaver accounts, suggesting the long-term value of retirement savings has not hit home for many.
David Callanan, Public Trust general manager corporate trustee services, said in a release that the disconnect highlighted in the survey was a “surprising insight”.
“As KiwiSaver accounts can only be used for retirement or a first home deposit in most instances, many people treat their accounts as ‘set and forget’ for a long period,” Callanan said.
“This means some people may not be reviewing their accounts regularly enough and, as this research shows, some may not view their KiwiSaver investment as an asset.”
Close to a third of younger respondents (Generation Z) fell into the low-wealth bucket, the PT survey shows, but 13 per cent of babyboomers and 15 per cent of the older ‘silent generation’ also reported a level of wealth not worth the bother of protecting.
KiwiSaver (58 per cent) was the second-largest asset of the low-wealth group behind a vehicle (66 per cent) while roughly a quarter owned property and 1 per cent boasted a boat.
More broadly, the PT intergenerational wealth survey reveals 45 per cent of Kiwis felt ‘financially uncomfortable’ amid rising costs and wealth inequality.
The stress is starting to show in KiwiSaver, too, based on the latest Inland Revenue Department (IRD) statistics. According to the IRD figures, KiwiSaver financial hardship withdrawals hit a 12-month high in May as more than 2,500 members pulled out a collective $20.4 million on desperation grounds compared to 1,821 and $14.1 million the previous month: although the May stat was on par with March when 2,662 members withdrew just under $20.3 million in total.
Overall, the 2023 financial hardship numbers are trending higher than last year, which saw such withdrawals range between $7.8 million and $14.5 million (representing 1,200 and 2,090 members, respectively).
Contribution holiday numbers have also ticked up this year, especially at the short-end where 60,336 members were on a 12-month or less in May 2023 compared to 41,279 in the same month last year.
Scheme transfers, too, surged in May to 11,141, up from 7,764 in April and breaching 12-monthly highs (excluding the July/August 2022 statistics that were boosted by the Aon-Fisher KiwiSaver merge).