KiwiSaver suffers from yawn factor

KiwiSaver is a key part of many New Zealanders’ retirement plans. But when it comes to the details, a large number of us still don’t really care.

A new survey and whitepaper from the country’s largest KiwiSaver provider have highlighted some of the problems with the retirement savings scheme, and made recommendations to improve it.

ANZ Investments said KiwiSaver members had started to focus more on the fees they paid.

Its research showed younger people were particularly concerned about keeping fees low, even if that came at the expense of returns.

‘‘This trend is a concern, as choosing a fund solely on fees means members may miss out on greater returns and a larger balance in the long term,’’ the investment team said.

‘‘This issue is emphasised when considering the impact of compounding returns, as higher returns should compound at a higher rate.’’

It was also worried by the number of people who turned to their KiwiSaver accounts to bail them out of financial strife. More than 10,600 members withdrew almost $60 million from KiwiSaver in 2016, about $18m more than in 2015.

ANZ said a centralised agency, such as Work and Income, should co-ordinate the hardship pre-assessments to ensure there was consistency across the industry and that all avenues of support had been explored.

‘‘With more and more people drawing on their KiwiSaver savings to support them in financial hardship, it’s essential the industry has a streamlined process is in place to ease the experience on stressed applicants.’’

It said too many people were not contributing to their KiwiSaver accounts, staying on contribution holidays too long, or not saving as much as they should. Many were not in the right type of fund for their circumstances.

Among its other proposals were requiring providers to offer free advice, to check in with everyone who withdrew money for a house a year later to make sure they were back on track for retirement, and help for people thinking about withdrawing their money in retirement.

ANZ also threw its weight behind making the system compulsory, which 60 per cent of the survey respondents supported.