New Zealanders worried about inadequate savings in retirement but not doing anything about it, ASB survey finds

By Amanda Morrall

Despite growing concerns about insufficient savings in retirement, the majority of KiwiSavers are not taking any concrete measures to address the issue, according to a survey by default provider ASB.

Close to 90% of KiwiSavers surveyed by ASB said they had no plans to boost their contribution rates within the next year. That's despite 70% admitting that they felt they were not saving enough for retirement.

ASB's executive general manager of wealth and insurance Blair Turnbull, said the survey findings reinforced the need to get New Zealanders thinking and planning more seriously about their retirement futures. One quarter said they didn't know how they will use their funds once they retired.

"We are seeing Kiwis increasingly acknowledge that they need to be doing more towards their retirement but we’ve not yet seen the flow through in terms of changes to current retirement savings patterns," Turnbull said in a prepared statement. 

Although respondents indicated they were not prepared to up their contributions, by law they will increase from a minimum of 2% to 3% effective April 2013. The increase also applies to employer contributions as well. (See also Amanda Morrall's interview with Financial Service's Council CEO Peter Neilson on why New Zealanders need to be saving more).

Of those survey respondents currently enrolled in KiwiSaver, 43% are contributing 2% of their gross pay.

Turnbull said while affordability issues were likely a contributing factor, many Kiwis remained ignorant about how much they would need in retirement because they hadn't given much thought to the kind of lifestyle they wanted in old age.

“It (the survey findings) also suggests that a significant proportion of New Zealanders have no clear strategy for the lifestyle they want in their retirement,” he said.

Expectation belies savings reality

Around two thirds of respondents estimated they'd need less than $50,00 per year once they ceased working, with 43% estimating they will need $30,000 per year. Almost 80% said they planned to stop working when they reached age 65 believing they'd need retirement income for an average of 23 years.

On average, respondents aspired to save $565,000 by the time they retire. This figure is in stark contrast to actual savings patterns identified in ASB's last KiwiSaver survey.

The previous survey found that actual savings rates for KiwiSavers were around $50 a week for investors 18 years and older. At that level a 35 year old investor could expect to have $70,000 saved up by 65, ASB calculated. 

Turnball said the gap between aspirational retirement savings and actual retirement savings was "unlikely to go away quickly" given the finding that 90% were not planning on taking action to address the shortfall.

Non KiwiSavers surveyed by ASB also signalled a potential savings deficit in old age. Around a quarter of those who weren't in the saving scheme said they felt they didn't know enough about it to join. A further 16 percent said while they were undecided they hadn't ruled it out.

While industry players have been lamenting for some time the number of KiwiSavers enrolled in conservative or default schemes, KiwiSavers aren't showing any signs of budging.

In fact, Turnbull said the last quarter has seen a"significant increase" in the number of KiwiSavers going into conservative-rated funds "with nearly 30 percent of all KiwiSavers now choosing the low-risk option."

Turnbull said the risk aversion was not surprising given global economic uncertainty. That and the fact that conservative funds, through the global financial crisis, have on average out performed higher risk funds.

“The relatively solid returns of some conservative-rated funds in comparison to the returns of some growth focused funds is proving attractive as well.”

For analysis on ASB's KiwiSaver scheme performance, see senior analyst Craig Simpson's evaluation here.