UPDATED - A KiwiSaver evaluation report released today shows strong continued growth and early signs that the scheme is working as intended.About 30,000 people joined the scheme each month over the last year - most, unsurprisingly, citing a desire to save
UPDATED - A KiwiSaver evaluation report released today shows strong continued growth and early signs that the scheme is working as intended.
About 30,000 people joined the scheme each month over the last year - most, unsurprisingly, citing a desire to save towards retirement as their main motivation for joining the scheme.
Employers contributed $626 million to employees' accounts in the year to 30 June 2010, with most employees contributing the minimum 2%.
Of the $5.8 billion passed to scheme providers for investment so far, $2.384 billion is accounted for by government subsidy payments – though the relative proportion of funds being contributed by members and employers continues to increase.
At the end of the year approximately 38% of the eligible population – over 1.5m people - had joined KiwiSaver; with a swing towards the 18-25 and 55-65 age brackets.
At the end of the year, two-thirds of all current members had opted-in and one-third had joined via automatic enrolment. Almost half of those who joined through automatic enrolment said they would otherwise not have joined the scheme.
Speaking on TVNZ’s Q+A show yesterday, Retirement Commissioner Diana Crossan described the scheme's growth over the last three years as “amazing” by global standards.
“All of the predictions were a lot, lot less than that,” she said.
While membership is growing, the key question at stake is whether or not members are better prepared for retirement as a result of belonging to the scheme.
The evaluation report suggests that there are early signs that KiwiSaver has generated some level of new savings over and above what would otherwise have been saved.
Just over one-third (38%) of households with at least one adult KiwiSaver member said that they were unlikely to be saving for retirement if they were not members of KiwiSaver.
Households also said they would have spent about one-third of their KiwiSaver contributions on day-to-day outgoings had they not been members of the scheme.
But Ms Crossan cautioned yesterday that KiwiSaver membership is not a ‘one size fits all’ solution to savings. She suggested that compulsory membership would be likely to disadvantage those on low incomes and constrain those on high incomes from making better choices on what to do with their money.
The KiwiSaver evaluation process runs until 2013 and is a joint project between Inland Revenue, the Ministry of Economic Development and Housing New Zealand.
The 2009/2010 report can be found here.
