Distrust, apathy behind reluctance to join KiwiSaver

BY ROMY UDANGA

Last updated 05:00 17/07/2010

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Apathy, mistrust, poverty and ignorance are among the main reasons people have not joined KiwiSaver so far, a survey suggests.

The research commissioned last month by fund manager AXA found 56 per cent of respondents under the age of 65 were not members of a KiwiSaver scheme. Of the non-members, 70 per cent did not have an alternative retirement savings scheme.

AXA head of KiwiSaver, Fraser Gardiner, said although KiwiSaver numbers had exceeded government expectations and 1000 new members were joining monthly, "there are still a lot of people missing out on the long-term benefits of belonging".

"Specifically, many people are not taking advantage of the government and employer contributions in KiwiSaver which can make a critical difference to the amount of money each New Zealander will have to help them in retirement."

Of those who do not belong to a KiwiSaver scheme, 20 per cent said they have not got around to it, are not worried about saving or simply do not know how to join. A further 15 per cent said they could not afford it, 10 per cent said they do not trust investing or do not trust the Government, 8 per cent said they are not employed, and 17 per cent cited other reasons for not becoming a member.

The numbers indicated KiwiSaver providers and the Government needed to work harder to educate New Zealanders of all ages about the benefits of saving, Mr Gardiner said.

Making KiwiSaver compulsory would not solve the underlying problem of poor financial literacy and a poor savings culture, he said.

"If people can afford to contribute 2 per cent of their salary, they can take advantage of the employer contribution and the $1000 kick-start and annual member tax credit from the Government under KiwiSaver."

Mark Weaver, partner at actuary services provider Melville Jessup Weaver, said the differences between a KiwiSaver and a non-KiwiSaver scheme can be "very substantial".

"For a 25-year-old employee with a $35,000 yearly salary and contributing 2 per cent of gross salary fortnightly, the employer contribution could mean a difference of about $101,000 when the investor reaches 65," Mr Weaver said.

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