Lower KiwiSaver threshold may be driving participation: ING survey

Tuesday 28th April 2009

Making Kiwisaver cheaper to join is driving up the popularity of the government-backed retirement savings scheme.

More than a quarter of private investors now intend to join, according to a new survey from ING.

Almost half the country's high net worth investors have joined the retirement scheme as at March, according to the ING Investor Dashboard Sentiment survey. A further 22% say they will join, up from 15% the previous quarter. The scheme’s popularity is consistent with yesterday’s FundSource report that found KiwiSaver net funds have grown to $15.3 billion.

"The minimum contribution rate of 2% may well regenerate interest from those who previously saw the 4% contribution level as a barrier,” said David Boyle, ING head of KiwiSaver distribution.

“While the scheme has proved far more popular than anticipated, there is still a long way to go before everyone who is eligible to take advantage of the scheme has actually enrolled.”

More than one million New Zealanders have enrolled in the scheme which was launched in 2007, a target not expected to be reached until 2015. The National-led government cut the payment threshold into the fund from 4% of a person’s income to 2% from the start of this month.

Most KiwiSaver funds held up well as the global economy heads for its first simultaneous recession since World War II, according to investment research company Morningstar’s second half-yearly performance survey. This is due in part to the default providers taking a conservative stance.

While a conservative approach may have helped investors hedge losses during the economic downturn, it won’t provide the level of savings required by people aiming to “live well” in their retirement, Boyle said. “Conservative funds have not historically delivered the best returns available.”

Businesswire.co.nz

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