Kiwis must save to avoid 'fiscal time-bomb'

New Zealanders are going to have to get used to less help from the government in their retirement. 

The head of default KiwiSaver provider Mercer, Martin Lewington, says a "fiscal time-bomb" is ticking away.

He says it's going to explode somewhere between 2030 and 2050, and as KiwiSavers," we need to recognise we are going to have to put away more for that rainy day".

"We are going to have to save more from our own resources and rely less on government."

Mercer has just released its latest KiwiSaver Sentiment Index Study, which shows participation in the scheme has increased to 61%, up from 44% in 2009.

The number of members who are "satisfied" or "very satisfied" in KiwiSaver also increased from 49% in 2009, to 54% now.

Mr Lewington says the survey shows New Zealanders are more realistic about retirement.

"Members continue to demonstrate a desire to retire at 57, but now expect this will be pushed back to 65, or even 70, to ensure they can live a comfortable lifestyle." 

This means employers need to cater to an older workforce by offering greater flexibility, fewer hours and improve incentives, he says.

The Mercer survey showed introducing a minimum 2% contribution helped drive up participation in the scheme, with 41% participating at this level, up from 29% in 2009.

It also revealed 30% of people are firmly against participating in the scheme, up from 22% in 2009.

Mr Lewington says this is largely made up of a cohort in the 45-plus age bracket.

"It could either be that they're already well-provided, or they are looking at it thinking, 'it's too late for me, I'm not going to get the benefits out of this scheme'.

"The ones who are much more positive tend to be the younger ones.

"Fund managers, the government and employers need to engage more with them because they are key to the success of New Zealand in the future."

Mr Lewington says New Zealand has a very generous pension scheme, which is something the government needs to address as the population ages.

"In 2030, that is going to start costing this country quite a lot. By 2050, we're going to have to spend about 60% of this year's earnings.

"It's going to cost us about $150 billion in today's dollars. That pushes it up to about 8% of GDP [from 4.6% today]."

He says there are three things the Government can address to reduce the burden.

"The age of eligibility, the level of contributions to Kiwisaver, and the generosity of the super scheme.

"There is a window of opportunity for the government to start signalling these changes. They don't have to implemenet them now, but every day they delay it, it gets harder."

Employers must also take some responsibility in reducing the burden on the government's purse by ensuring KiwiSaver members and employees are preparing for their retirement.

Mr Lewington says this could involve running educational seminars in conjunction with a preferred provider to educate employees.

Making KiwiSaver compulsory is not something the Government needs to consider, particularly as new employees are now automatically enrolled with an opt-out option.

"That's probably as far as we need to go. New Zealanders don't like to be told what to do."