Getting an accurate picture of how much you might have at 65 from projections in annual KiwiSaver statements is "fraught with difficulty", the head of the financial markets regulator has admitted.
But Rob Everett, chief executive of the Financial Markets Authority, believes it is still the best way to get people to engage with their retirement savings and work out if they will have enough.
For the first time this year annual KiwiSaver statements which are due out around now have projections on how much an individual could have in their account at age 65 based on their current savings rate and what this could give them on a weekly basis until aged 90.
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But they are based on a number of assumptions including that a person gets a pay rise of 3.5 per cent per year, take no savings suspensions until age 65 and doesn't withdraw any of the money to buy a first home or for financial hardship reasons.
That will mean the projections are meaningless to many who plan to use KiwiSaver for a first home or are forced to tap up their savings to pay their bills in the current economic climate.
Getting a 3.5 per cent pay rise could also be a long way down the track with many taking a pay cut this year and businesses expected to do it tough for the next few years in the wake of the Covid-19 restrictions.
It also assumes an annual return of 2.5 per cent for a conservative fund, 3.5 per cent for a balanced fund and 4.5 per cent for a growth fund.
"It is fraught with difficulty," Everett told the Herald when asked how realistic the projections were.
He said the government worked with actuaries to decide what numbers to use when it came to average returns for funds and while there would be years when the numbers looked low and others where they looked high.
The forecasts are likely to be on that high side this year when a massive slump in the markets in March sent many funds into negative territory for the year.
"To us they seem reasonable. The assumptions for growth funds were lower than the historical performance figures for the last five and 10 year periods. But the last 10 year bull run has seen very strong growth."
In fact Everett is happy that complaints from KiwiSaver providers that they wouldn't be ready in time forced the projections to be delayed until this year's statements.
He said looking back last year they could have seen people take too much of a rosy view of their retirement nest eggs.
"To some extent I am quite comfortable this is coming in a period when not only are balances down, but people are more engaged with KiwiSaver."
He said if it meant more people picked up their statements it was a good thing. Research showed that people were more likely to be engaged if they saw dollar figures as it was something real and relatable rather than percentages.
There have been concerns that putting an exact number on how much an individual could have will result in a blowback on providers when that person hits 65 only to find a balance much lower than they expected.
Everett said there was a bit of risk that people mistakenly assumed it was a "gold plated number" but the figures were just projections.
"Most people's circumstances will inevitably differ from the assumptions used."
The timing of the annual statements could not have been worse with global markets hitting a low around March 23, just a week out from the March 31 annual statement cut-off.
Since then markets have rebounded strongly and are not far off all time highs again.
Everett said that was why people needed to see KiwiSaver as a long term investment.
"That is going to happen, you are going to get cycles where things stagnate or go backwards."
"What we are hoping is that people take a long term view and don't panic."
Unfortunately that hasn't been the case with the latest fall with around $1.4 billion thought to have been moved from growth funds into lower risk conservative and cash funds in March and April in panic driven switching.
Everett said that while that was a fraction of the $60 billion invested in KiwiSaver, many would have been people who hadn't thought it through and were in the wrong fund.
"It is a natural human reaction to want to change it," he said, noting the regulator had not been surprised by the reaction.
"We saw precisely what we expected."
Everett said he was pleased with how most providers communicated with members through the period although he believed they could learn lessons in ramping up resources in times of crisis from the massive spike in calls received during the peak of the market down-turn.
The extent of the Government's spend up on helping businesses and workers survive financially through the lockdown fallout has also prompted some to question whether New Zealand Superannuation will have to be pulled back in the future to help cope with the extra debt.
That raises questions about how much people need to save in KiwiSaver if the NZ Super age of eligibility is raised, reduced or cut in the future.
Everett said it was an issue that he worried about too.
But he said any government changes to NZ Super would need to give a long lead-in time because a lot of people would have made their plans with super in mind.
"Moving the goalposts would be very problematic."
Everett said it was fair to assume NZ Super would keep going but there were elements of it that could change.
He urged those who could afford to do so to contribute as much as they could to KiwiSaver to give themselves a buffer which would help immunise themselves against political change.