The demographics of KiwiSaver investment has produced a great divide - men and women are wide apart when it comes to deciding what funds to use. Graham Skellern explains
KiwiSaver is not a 'one size fits all' option ... Dr Claire Matthews, Massey University Centre for Banking Studies
New Zealand men are greater risk-takers than their women counterparts and in the long term may earn more from their KiwiSaver schemes, says Dr Claire Matthews, director of financial planning at Massey University's Centre for Banking Studies, who has completed a KiwiSaver and retirement savings survey.
She says men and women are making different choices about their retirement savings. Men are more likely to invest in aggressive and growth KiwiSaver funds, while women are more likely to choose conservative funds.
"Males are risk-takers, whether it's in their choice of car or their investment fund," Dr Matthews says. "But when it comes to long-term savings, risk-taking can actually be an advantage."
She says men are more likely than women to have prior savings when joining KiwiSaver (just over half of men, versus 38 per cent of women).
"These figures reflect and confirm, quite disappointingly, the difference between males and females and the level of interest they take in financial planning," Dr Matthews says.
"It's important for all New Zealanders to be better-educated about their personal finances, but this is particularly so for women."
Other demographic factors, including age, ethnicity, education and income, can also influence the choices being made about retirement savings.
Dr Matthews found that those with bachelor and higher degrees, and those in households with a pre-tax income of $100,000 or more, were more likely to choose aggressive and growth funds.
On the other hand, the youngest and oldest age groups were more likely to be invested in conservative funds. Although this may be appropriate for the life-cycle stage of older investors, it may not be so appropriate for younger, longer-term investors.
Younger investors are either staying in default funds allocated by their provider, or lack the knowledge and confidence to invest more aggressively, says Dr Matthews. She advises all investors to seek advice about the best choices for their individual circumstances.
With demographic characteristics playing such a key role in the choices people make about KiwiSaver, it is important for gender, age, income and education differences to be acknowledged by the Government, advisers and providers, Dr Matthews says.
"It means that KiwiSaver is not a 'one size fits all' option, and it is important to manage its promotion and its structure to meet the varied needs of the population," she says.
At the end of December, 1.86 million Kiwis had become KiwiSaver members, while 252,000 had opted out. Just over 950,000 members were females and just under 900,000 were males. The investments were evenly spread between people aged 17 and 55 and over.
After last year's Budget, the Government will contribute 50c for each $1 contributed by KiwiSaver members, to a maximum of $521.43 a year - effective from April 1. At the same time, employer superannuation contribution tax will apply to all employers' cash contributions to employees' KiwiSaver accounts.
This means employees may receive less employer contributions than in the past. From April 1, 2013, there are other proposed changes - the minimum employee contribution rate and compulsory employer contributions will rise from 2 per cent to 3 per cent.