Infometrics report on the current and potential impacts of KiwiSaver

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Infometrics report on the current and potential impacts of KiwiSaver
Strictly Embargoed till 7am on Thursday, 3 January 2013
INFOMETRICS REPORT ON THE CURRENT AND POTENTIAL IMPACTS OF KIWISAVER
Key Points from a report from Infometrics titled The Potential Impact of KiwiSaver on the New
Zealand Capital Market, which was commissioned by the Financial Services Council (FSC) are:
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If KiwiSaver can achieve closer to universal coverage, say 80 percent of the workforce and
contributions move up to 10 percent, (5 percent from employees and matched 5 percent by
employers) the KiwiSaver fund would grow from its current level of $13 billion today to $731
billion by 2066.
The impacts on the economy for New Zealand would be substantial and include investment
in new jobs, an improvement in worker productivity and wage rates, slightly lower interest
rates and a more resilient economy during recessions.
Those starting work today would also get twice the pensions they would be entitled to
currently from just NZ Super when they finish their working careers. They would look
forward to a comfortable lifestyle, compared to those retiring today.
To reach the $731 billion goal new KiwiSaver enrolees would need to increase their
contributions by 1 percent a year to reach a total of 10 percent. This is an extra half percent
a year each from themselves and their employer, over 10 years from 2015 to 2024.
Existing KiwiSaver members whose contributions currently average 5 percent of income
rising to a minimum of 6 percent this year, would only need to increase contributions by 1
percent a year for four years to achieve a 10 percent contribution rate for the rest of their
working years and reach the $731 billion goal.
The average KiwiSaver contribution at 5 percent is well below other countries and way short
of what is needed to provide people starting work today with a comfortable retirement
income for their expected longer retirement.
Australian employers, who currently pay 9 percent, will move up to 12 percent over the
balance of this decade.
Two million New Zealanders and some 50 percent of the workforce are currently signed up
to KiwiSaver.
Existing KiwiSaver funds are already creating a significant boost for younger New Zealanders
purchasing their first home. In 2012 KiwiSaver funded deposits on 10,000 first homes,
worthy around $3 billion.
Money is being invested into fast-growing New Zealand businesses and helping those
businesses maintain a New Zealand base and ownership.
KiwiSaver is creating a cushion against future economic downturns by ensuring capital
continues to flow into companies because the contributions don’t stop being invested in
response to short-term events, such as a share market downturn.
The Financial Services Council (FSC) has funded the research to stimulate further discussion. It will
test New Zealanders appetite for a universal KiwiSaver Plus savings scheme with market research.
About the Financial Services Council
The Financial Services Council has 22 member companies and 17 associate members. Members are
managing nearly $80 billion in savings and provide financial services to more than 2 million New
Zealand investors and policyholders.
If you have a life insurance policy or a KiwiSaver account then there is a more than 80 percent
chance it is managed by a Financial Services Council member. Last year the FSC report Pensions for
the 21st Century: Retirement Security for Younger New Zealanders kicked off renewed debate about
how to provide most New Zealanders with a comfortable retirement income when our longevity
after 65 years is growing by two years every decade.
For further information contact Peter Neilson, CEO of the Financial Services Council Tel 021 395 891
www.fsc.org.nz
Released by Iain Morrison from Morrison McDougall Public Relations, 93 Boulcott Street Wellington 6011,
Tel 04 473 7980 or 021 688 668 www.morrimac.com

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