It’s pay day for Kiwisaver’s first lot of retirees

KiwiSaver’s first lot of spenders are mostly choosing to get away from it all with a holiday. KiwiSavers first retirees are reaching withdrawal day – and celebrating with holidays, cars and home improvements.

Paying off debt also features on the spending lists of the first-ever group of over-65s to become eligible to take out their money.

A Colmar Brunton survey of 1000 KiwiSavers aged over 65 found most of the scheme’s first withdrawers were planning to re-invest at least some of the cash outside the scheme, citing better returns, better security or perceived easier access to spend it than they thought they could get inside KiwiSaver.

On current intentions nearly threequarters will have cleaned out their accounts within five years.

The IRD wrote the report with Colmar Brunton to gauge how members were using the withdrawal process and what they planned to do with the money.

The department cautioned these early behavioural trends may not carry on, given today’s withdrawers were in the scheme for just five years and have small average balances: mostly $15,000 or less.

KiwiSaver – now more than 2 million people strong – is designed to boost savings and increase people’s incomes after 65.

People who are 65 or older and who have been in KiwiSaver for five years or more can withdraw all or part of their savings, with 72,000 people qualifying by June 30.

So far there are few annuity-type products that would allow people to convert lump sums into income – a gap that has been criticised by some financial commentators.

However most KiwiSaver providers offer a free or cheap withdrawal facility so people can leave their money in the scheme and draw it down in regular amounts.

The survey revealed few people were taking that option, with at least eight in 10 preferring to take a lump sum.

The Colmar Brunton telephone survey canvassed people who were eligible to withdraw their KiwiSaver savings as at December 31, 2012 – six months after the first people became eligible.

Few had blown the money straight away and the smaller the balance, the more likely people were to have taken it.

Half had spent, or planned to spend within the first few months, at least some of their savings, most popularly on holidays (61 per cent of spenders) followed by home improvements or new housing (37 per cent) and major purchases such as a car or boat (32 per cent).

Around one in seven said they would use their KiwiSaver savings to pay off debt, including mortgages.

More than half planned to put some money in other investments.