Coffee or a double shot of savings
Most KiwiSaver members are putting aside less than the cost of a cup of coffee a day to fund their retirement.
New data from Inland Revenue shows how much New Zealanders contributed to their KiwiSaver accounts in the year ended June 30.
Just over 100,000 people put in less than $100 in the year. About 500,000 put in up to $1000. Another 521,332 contributed between $1001 and $2000.
Only 500,000 put in more than $2000 in the year.
Someone putting in $2000 a year from the age of 25 could expect to end up with about $155,000 in their KiwiSaver account at retirement, ANZ calculates.
The Inland Revenue data includes employee deductions from pay, employer contributions, Government contributions and voluntary contributions that went via Inland Revenue.
All up, about a million members put in $2000 or less – that works out to $5.50 a day, roughly the cost of a cup of coffee, or $166 a month – for many people, less than the cost of a hair appointment.
Blair Vernon, managing director of KiwiSaver provider AMP, said most people were not saving enough.
‘‘They’re contributing something and that’s a great start,’’ he said. ‘‘But we need to think about if that amount that is being saved leads to a certain income and that’s not the retirement they want, what can they do about that?’’
That could mean saving more, perhaps foregoing some spending, or adjusting their expectations.
Those who were on too tight a budget to save more might need to adjust their retirement plans, he said. Most people indicated they wanted a degree of flexibility and choice in retirement that their savings habits would not provide for.
By international standards, New Zealand’s standard KiwiSaver contribution of 3 per cent of pay plus 3 per cent from an employer was low. Australia’s level is set at 9.5 per cent, increasing to 12 per cent.
He said there was a risk of an assumption that because 3 per cent was suggested as a minimum level, that amount of saving would be sufficient. ‘‘People might think ‘surely the Government must know’.’’
Ana-Marie Lockyer, general manager of wealth at the country’s biggest KiwiSaver provider, ANZ, said contributions of $2000 or less would probably not be enough if savers planned to live only on KiwiSaver plus the pension.
‘‘It’s different if they have other assets, a house or another income stream to draw on.’’
She said ANZ research showed 75 per cent of people were planning to fund their retirements with KiwiSaver.
Massey University estimated that single people would need total income of $757 a week in the main metropolitan centres to have a ‘‘choices’’ lifestyle in retirement, and $493.38 in provincial towns. The pension would give them $780 a fortnight after tax.
That means, at a minimum, a city-dweller would need an extra $367 a week if they wanted to be able to afford a few luxuries.
But to achieve income of $300 a week on top of the pension, they would need to save $370,000 – almost twice what someone saving $2000 a year could hope to accumulate.
‘‘There are many reasons why members may have made low contributions: they may have been on a contributions holiday, they could have been out of work for some periods of the year, they could have been out of the country for an extended period, or they didn’t earn enough throughout the year to contribute,’’ an Inland Revenue spokesman said.