More Kiwis 'feeling unprepared for retirement'

LESS MONEY: Mercer, one of KiwiSaver's main providers, found that 49 per cent of people think life in retirement would be less comfortable than now, up from 42 per cent three years ago.

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The global financial crisis, finance company failures and falling house prices are leaving many New Zealanders feeling unprepared for retirement despite the advent of KiwiSaver, a survey shows.

Mercer, one of KiwiSaver's main providers, found that 49 per cent of people think life in retirement would be less comfortable than now, up from 42 per cent three years ago.

That was despite almost half of those surveyed being members of KiwiSaver now, up from about a quarter saying they were in a work-based super scheme in a 2007 survey carried out before KiwiSaver was brought in.

About 1.3 million people are in KiwiSaver, with almost $4.9 billion invested.

As one of the main default providers, Mercer has 70,000 KiwiSaver clients with $300m invested out of Mercer's total pool of $1.8b under management.

"The global financial crisis did give people a cold shower that markets can go up and they do go down as well. It left people feeling pretty concerned," Mercer New Zealand head Martin Lewington said. The performance of KiwiSaver funds last year had not been as good as expected, despite the rebound from a low point in markets in March.

Other factors were finance company failures, a rise in unemployment and lower house prices.

The survey showed the main concern about KiwiSaver was the lack of a guarantee and the future viability of the scheme.

As a main default provider for KiwiSaver, Mr Lewington said all KiwiSaver schemes should be subject to the same scrutiny as the big funds. "It is about transparency and disclosure," he said, such as saying when a fund has more than 5 per cent of its funds in a specific investment or related-party transactions.

A concern also existed that some people may have put money into KiwiSaver funds, chasing the top performers without understanding the risks.

One of the biggest challenges was improving the comparison of Kiwisaver funds. "Inevitably you are comparing apples with pears."

In some balanced funds, for example, there is about 40 per cent in growth assets such as shares, but other "balanced" funds may have up to 70 per cent in shares.

"That is quite extraordinary and there can also be a significant exposure to property," he said. They were all legitimate investment options, but that made it hard to compare funds.

"Do we get to colour-coding [for risk], red would suggest hot stuff and enter at your peril?" he said.

Some of the people expecting to be worse off in retirement may be concerned that internationally governments have bailed out big banks and taken on huge debt, raising doubts about affordability of state pensions.

Prime Minister John Key made an election promise to hold the age of pension eligibility at 65 despite warnings of the risks of rising costs in the long run as the population ages.

- © Fairfax NZ News