Savings have dropped to critical level, survey finds

Fewer New Zealanders are saving for retirement, an annual savings survey showed today.

Fund manager Sovereign, which commissioned the survey, said resistance to savings had reached a critical point.

Sovereign's SaverPulse annual survey showed a 5 percentage point drop to 52 per cent in the number of people saving for retirement.

The number of respondents beginning retirement savings is among the lowest in the seven-year history of the survey.

"The economy is up, but motivation down," Sovereign managing director Simon Swanson said.

"With the booming housing market and more buoyant economy people have more disposable income.

"But this survey reveals an alarming indifference toward saving as people choose to live for today, rather than save for their retirement."

The majority of respondents (72 per cent) are not relying on an inheritance to provide them with an adequate retirement income.

The survey also showed a 10 per cent drop in the number of people who said they were trying to save as hard as they could, to just 54 per cent.

The majority of the people who hadn't begun saving for retirement were under 30 years old. Respondents claimed they felt guilty about not saving for retirement, but that was not enough to encourage them to start.

"Their guilt appears to have influenced their motivation, with only 36 per cent of respondents saying they contribute to a regular savings plan."

The survey showed more than 40 per cent of respondents found it difficult to decide on how to go about making saving and investment decisions.

Mr Swanson said people were increasingly confused by the proliferation of savings products in the market.

"They've got their family and friends, experts and the government all telling them different things. Their response is to do nothing."

Despite the lack of savings, 78 per cent of people said they did not believe the government would provide them with an adequate retirement income.

Of the 34 per cent of people who do not currently contribute to a retirement savings plan, one in five say it's because they "hadn't got round to it".

Mr Swanson said a clear majority of those surveyed, 71 per cent, were in favour of some form of compulsory savings scheme.

In addition, 67 per cent said that if offered, they would participate in an employer-based retirement scheme. The figure of people in favour of tax incentives to encourage savings remains high, at 84 per cent.

"The survey delivers a clear message from the public, Mr Swanson said. "They want compulsory schemes that remove the temptation to spend money, are simple to understand and operate, and provide a suitable type of investment strategy."

He said the government had just launched a scheme for state sector employees which addressed many of the issues raised in the survey.

"The survey suggests that the general public is looking for a similar solution for their retirement plans."

Despite the lack of savings, 73 per cent of people sampled were confident they would have enough savings to support themselves in retirement

Of 69 per cent of those sampled who own their home, one third considered the house as part of their retirement savings.

Some 23 per cent of respondents believe residential property investment gave the best return - more than double that of any other type of investment.

Less than 30 per cent of people surveyed use a financial planner and only 32 per cent of the total were very confident they were making the right investment decisions.

- NZPA