Over 65s loving KiwiSaver
The lifespan of KiwiSaver accounts is extending as older workers use them to manage their money, reports Rob Stock.
KiwiSaver is morphing into a tool over-65s use to manage their wealth, and advice is in demand.
But increasingly it will be artificial intelligence, chatbots and robo-advisers on hand to help KiwiSavers approaching the age of 65 do their planning, not humans.
A rising tide of people is hitting 65 every year, and KiwiSaver providers don’t have the people to speak personally to every one to help them make informed choices with their nest eggs.
Gone are the days of KiwiSavers withdrawing their money at age 65 and shutting their account.
‘‘At least 20 per cent of our members keep their KiwiSavers going, and continue making contributions,’’ says Kiwi Wealth’s Joe Bishop. ‘‘They’re still working.’’
They are doing the late-life retirement savings ‘‘sprint’’ to boost their nest eggs from their double incomes of wages and NZ Super payments.
Even folks who stop saving at 65 don’t all withdraw their money, preferring to keep it invested.
‘‘Sixty per cent of members are keeping their funds in place,’’ says Bishop.
AMP says 88 per cent of its KiwiSavers turning 65 chose to remain in the scheme, and nearly half (48 per cent) continue to save.
No ‘‘standard’’ lives
When Alec Waugh, 68, retired he cashed up his KiwiSaver, but then he came to it late in life at the age of 60.
For Nelson-based Waugh, who formed the KASPANZ (KiwiSaver, Annuity, Superannuation Protection Association of New Zealand) to counter attacks on NZ Super, KiwiSaver made a small welcome addition to his savings, but not big enough to bother leaving it invested once he turned 65.
But as balances rise, fewer people are drawing out their whole KiwiSaver.
‘‘We have one member who is 91 and still invested in a growth fund,’’ Bishop says.
He saw his KiwiSaver as legacy money for the next generation, and was happy to take risks to try to increase its value.
There is no longer any such thing as a ‘‘standard’’ money life, Bishop says, and non-standard lives mean people need help making decisions.
KiwiSaver providers, stung by criticism by the Financial Markets Authority last year about their failure to get members engaged, are investing heavily in a bid to help.
It’s good for their profits too. More people leaving their money invested keeps KiwiSaver profitable for them.
Silvering of KiwiSaver
Coping with the demand for advice is a growing challenge.
In the 12 months to June 2012, just two KiwiSaver accounts were closed due to people retiring.
In the same period to the end of June 2017, 106,817 were closed.
The number of KiwiSavers aged over 55 passed the halfmillion mark in 2017.
It’s in their 50s that people really start engaging with KiwiSaver, Bishop says.
Choices aren’t always straightforward, especially after the last pay packet arrives.
‘‘Retirement planning is difficult – in fact, the most difficult part of finance,’’ says Martin Hawes, from the Summer KiwiSaver scheme.
‘‘Nearly everyone is concerned about how to substitute a regular pay cheque from work for a steady income from investing a lump sum. Many people get this wrong and end up with their wealth in term deposits or a second-tier finance company.’’
Robot advisers
While Kiwi Wealth has become the first KiwiSaver provider to get a licence to provide roboadvice using artificial intelligence (AI), other KiwiSaver providers are vying to catch up through their investments in technology.
AMP has unveiled a chatbot called Alex, who’s there to handle queries, but refers people to human advisers should things get too complex.
‘‘In time Alex will begin to respond to a range of customer enquiries via our website, including helping KiwiSaver members to make more informed choices,’’ says AMP’s Blair Vernon.
‘‘Alex is still learning and developing her personality. She uses natural language processing and AI and looks at the context of any conversation, rather than simply picking up on keywords.’’
Simplicity has launched its own chatbot.
‘‘We launched NZ’s first chatbot for KiwiSaver called Artie, who already has an 80 per cent answer rate for questions, and is still learning,’’ says Simplicity founder Sam Stubbs.
‘‘The future in our mind is unquestionably a combination of robo-advice and, for more complex situations, a fee-based adviser. We are already writing a robot advice platform, which will be open source and product agnostic.’’
Human advice
The rise of robo-advice won’t result in human job losses, says Bishop.
‘‘We think this increases demand for human engagement.’’
ANZ surveyed its KiwiSavers, and found people wanted ‘‘free’’ advice, but about a third were keen not to get it from a roboadviser.
Some KiwiSaver schemes, such as AMP, Summer and Booster, have close links with advisers, but even they need online tools, and AI, to cope.
‘‘There are individual preferences for how people like to interact,’’ says Hawes.
‘‘For some, personal contact with their adviser is best, and this may mean a phone call or a face to face meeting.’’
Managed retirement tool
Instead of losing KiwiSavers as clients at age 65, providers are seeking ways of convincing people to use KiwiSaver to help manage their wealth in retirement.
At age 65, KiwiSaver is no longer locked in, but people can retain their accounts, and even add to them, knowing they can get their money out when they need it.
All big KiwiSaver providers let people to take regular withdrawals, for example, $300 a
‘‘At least 20 per cent of our members keep their KiwiSavers going, and continue making contributions. They’re still working.’’ Joe Bishop, Kiwi Wealth
month, from their accounts.
But providers are developing more sophisticated schemes.
David Beattie, from the Booster KiwiSaver scheme, says it is close to launching a ‘‘managed retirement’’ system which advisers can use with their clients to turn KiwiSaver into regular income, assuming people will live to 85.
It’ll help people work out how much income (and capital) they can spend each year to top up NZ Super, and be sure they won’t run out of money.
It doesn’t require enormous amounts of money either.
‘‘People don’t need to save $1 million. With $200,000, if people have their own home, they are going to be comfortable,’’ he says.
Part of the managed retirement scheme Booster was working on would be longevity insurance to make sure they still have money, should people beat the odds and outlive their money.
‘‘When they reach 85 to 90, we are working on ways to provide longevity insurance,’’ Beattie says.
Something similar already exists. After years of New Zealand being an annuity desert thanks to a dearth of Super savings, and punitive tax settings, the country saw the creation of a ‘‘variable annuity’’, and Simplicity was quick to start offering it.
‘‘We launched NZ’s only annuity KiwiSaver this year, which pays a guaranteed 5 per cent return, after fees and taxes for the rest of a member’s life,’’ says Stubbs. ‘‘It pays it from capital and returns in the fund, and if their money ever runs out, an insurance policy continues to pay the 5 per cent.’’
Email, phone and letters
Sometimes the best tech is the old tech.
In the runup to age 65 the frequency of contacts people experience increases.
‘‘We email AMP KiwiSaver Scheme members when they turn 63, 64, and 65 years old to remind them of the range of options available to them,’’ says Blair Vernon. ‘‘89 per cent of members open the email.’’
And some providers even send letters as people near 65.