KiwiSaver popularity on the rise ahead of move to cut back scheme

Photo / APN

An investor survey shows the popularity of KiwiSaver as offering the best investment return is growing but this could be affected by changes following the Budget.

The ASB's quarterly survey out today finds KiwiSaver has climbed from last place to third equal in return perceptions.

The ASB's head of private banking and wealth management Jonathan Beale said those expecting KiwiSaver to be their main source of retirement funding also reached a new high of 62 per cent (up from 61 per cent in the last quarter of last year), while respondents currently using the scheme climbed 5 per cent to 43 per cent.

"After almost four years of contributions from individuals, employers and the Government, investors are starting to sit up and take notice of KiwiSaver," Beale said.

Fund balances are growing, and the KiwiSaver scheme has proven to be a successful way of turning around the poor savings habits of many New Zealanders."

Beale said he expected there will be "some change in perception" of investors following Thursday's Budget which include reductions to the KiwiSaver member tax credit and provisions for increased contributions from members and employers.

"However, we believe KiwiSaver is still likely to remain the most popular retirement savings vehicle for respondents in our survey."

In spite of the growing appeal of KiwiSaver, it lags behind rental property in Auckland which investors in the city remain firmly attached to. In Auckland rental property came in at number one on 19 per cent, with term deposits second at 17 per cent and KiwiSaver third at 12 per cent.

Outside Auckland respondents to the online survey rated term deposits top at 22 per cent, followed by bank accounts and rental property a distant second equal at 12 per cent, and KiwiSaver fourth at 11 per cent.

"The popularity of rental properties in our largest city could be due to several factors, including the relative buoyancy of the property market in Auckland," Beale said.

"However, this popularity follows a flatter period which started a year ago, so time will tell whether this love affair with Auckland rental property will continue, especially considering last year's changes to tax on rental property, and forecast increases in interest rates."

Taking New Zealand as a whole the most popular investment class was term deposits, 19 per cent, rental property remained second at 15 per cent, followed by KiwiSaver and bank savings accounts equal at 12 per cent, Managed investments, unit trusts, and superannuation were at 10 per cent and shares lagged at 6 per cent.

The survey of 720 respondents also found confidence slumped sharply following the February 22 earthquake in Christchurch.

The final quarter survey last year showed investor confidence may have turned a corner, and the data up until the earthquake indicated that confidence was at least stabilising following six months of decline.

However, the after-effects of the quake saw the confidence index slide from a net nine-point drop down to a net 10 per cent between the quarters.

"This confidence knock shouldn't linger in the long term," Beale said. "We expect confidence around the country will climb again, as more certainty around rebuilding starts to emerge."