630,000 expected to join by now but 2.35 million already signed up

With MoneyWeek starting on Monday, what better excuse is there to take control of your KiwiSaver account? Many readers will have stashed tens of thousands of dollars by now, which will have accumulated fairly painlessly - money taken out before you see it is always the easiest to part with.

The scheme has also built up some impressive statistics, which ANZ's wealth products and marketing general manager Ana-Marie Lockyer told me about:

We've embraced KiwiSaver

About 630,000 people were expected to have joined KiwiSaver by now, says Lockyer, whereas 2.35 million have.

Advertisement

Low earners are joining KiwiSaver

Up to June, 576,700 people earning less than $20,000 were KiwiSaver members. Some, but not all of these, will be children or be on contributions holidays. Across all schemes there are now over 342,000 members aged 17 or under. The Financial Markets Authority (FMA), which provided these figures, believes a large proportion of these members currently make no contributions. However, I've heard of beneficiaries paying into KiwiSaver in the hope of having a more financially secure retirement than New Zealand Superannuation alone can provide.

More people have joined voluntarily than been auto-enrolled

According to Inland Revenue Department (IRD) numbers, 917,544 people have been automatically enrolled by employers. The number for those who opted in via their employers was 267,943, and those who joined directly with a provider were 1,165,078. That surprised me because of the sheer amount of noise from those who complain that they enrolled automatically and didn't want to be.

Almost 70 per cent of members made an active investment choice

IRD figures show that 69 per cent of members made an active choice of their current scheme, whereas 31 per cent were either default allocated or employer nominated.

We're buying first homes

The Commission for Financial Literacy and Retirement Income says in the year to March 31, 13,821 savers withdrew a total $169 million for first-home purchases. In the financial year to date, Housing New Zealand has approved 1577 first-home subsidy applications. This shows that it's not impossible to buy a first home and that people are putting their KiwiSaver money to good use.

Retirees are withdrawing their money

The IRD says that up to September 30, 52,500 members had withdrawn their savings and closed their KiwiSaver accounts because of retirement. That means 45 per cent of members eligible to withdraw their savings have done so. Some say this figure is expected to rise to nearly three-quarters in the next five years. I worry that one of two things is going to happen to many people's KiwiSaver savings, especially those people who live week to week financially and don't have good financial literacy skills. They will either blow the money Lotto-style or members of their family will convince them to hand it over for the grandchildren, the business, or just to pay the kids' debts off.

Self-employed people are more motivated

According to the ASB's latest KiwiSaver report respondents who are self-employed are significantly more likely to have joined KiwiSaver independently than those not self-employed (49 per cent versus 25 per cent).

A small number of schemes are winners

There are 29 scheme providers and 200 different funds, but 75 per cent of all savers are enrolled in just seven schemes, says Binu Paul of SavvyKiwi, a KiwiSaver tracking tool.

We're missing out on millions

The Government holds on to $400 million a year in KiwiSaver subsidies that it would have to hand over if everyone paid in the minimum. ANZ analysis found that 58 per cent of possible Member Tax Credits were paid out to its members in the 2014 year. The member tax credit of $521.43 is paid into accounts where the saver puts away a minimum of $1042.86 a year. The 2014 figures were a significant improvement from 2013 when 47 per cent collected it, the IRD says. Nonetheless we're missing out on millions collectively by not investing the minimum, which amounts to $20.06 a week.

The returns beat bank savings

In the 12 months to June, about 75 per cent of funds earned more than a bank term deposit, while a third of them earned more than 10 per cent, according to SavvyKiwi.

Not all money invested in KiwiSaver is 'new savings'

New Zealand Treasury research found that members sometimes adjust where they're saving to take advantage of KiwiSaver. As a result only about one third of the contributions represent additional savings.

Contributions holidays are popular

The IRD says that a total of 114,504 of members are on a contribution holiday. According to ANZ's records 55 per cent of people on contributions holidays are aged 18-35 and only one quarter of people on contributions holidays do it for affordability reasons.

Some members don't know they're not contributing

The ANZ surveyed people who were on a contributions holiday and found that more than a quarter didn't realise they weren't paying in, having apparently forgotten to resume contributing. These may be people who would become more engaged with their personal finances if they could see their investment building.

We have billions saved

The total assets invested in KiwiSaver at March 31 exceeded $21.4 billion. Kiwis are said to have another $5 billion saved in Australian Super.

Default schemes are huge

The FMA's annual KiwiSaver report noted that the default schemes have 20 per cent of the total membership and 17 per cent of the total assets invested.

We've saved an average of $9300 each

This amount includes people aged under 18 and those on contribution holidays. So the reality is that many people have a lot more than this.

Most think KiwiSaver should be compulsory

Massey University's Claire Matthews found that 63 per cent of people she interviewed in research for the Financial Services Institute of Australasia (Finsia) agree that KiwiSaver should be made compulsory.

People invested in growth funds are more confident

The ANZ's regular survey found that 68 per cent of people whose KiwiSaver is invested in growth funds are confident of reaching their goals compared to 46 per cent of people in conservative funds.

Money adds up fast

At a moderate return of 5 per cent a year, most Kiwis will have as much as their annual income in their KiwiSaver savings by year 12 or 13 of their contributions. This assumes a minimum 3 per cent contribution matched by the employer and with no contribution holidays.

Some members are withdrawing their savings because of significant financial hardship

The FMA says that during the last financial year 8044 members withdrew funds of $31.2 million under the significant financial hardship provisions of the KiwiSaver Act. That was a slight increase from the previous year.

Bankrupts are losing their savings

What happens to your KiwiSaver savings if you go bankrupt is contentious and KiwiSaver Trustees have argued against the Official Assignee being able to take money to pay off bankrupts' debts. Nonetheless the Official Assignee has clawed back $827,000 of KiwiSaver savings from 208 bankrupts. There will be other bankrupted members who haven't yet handed over money to the Official Assignee, but will have to do so when they withdraw their money on retirement or for other reasons.

We can be fickle

According to the FMA 129 KiwiSaver members have made five switches or more up until March 31. Another 556 members have made three or four switches. In total only 49,114 people of the 2.35 million people in KiwiSaver have switched funds in the year to March 31. One of the 29 providers was left out of this data.

Not all members contribute

The FMA says that only 55.5 per cent of total members are contributing. The non-contributors include a significant number of members aged under 17 and some self-employed people. Many self-employed people make lump sum contributions close to the end of their tax year rather than contributing regularly.

To find a Money Week event visit Moneyweek.org.nz