Savers Pay High Price for Procrastination

30 September 2013

Savers Pay High Price for Procrastination

New Zealanders who put off saving for their retirement year after year will pay a high price for their procrastination and will struggle to plug the gap if they depend on NZ Super alone for their income, Financial Services Council analysis shows.

“NZ Super is a wonderful scheme to stop people falling into poverty in old age, provided they own their own home, mortgage free, by retirement” says FSC CEO, Peter Neilson. “On the current settings people need to save 10% of their income every year over 40 years from age 25. If you wait another 10 years you’ll need to save 15% of your income and on it goes and if you wait till you are 55 then you’ll need to save 50% of your income – that is a big ask indeed.”

The Financial Services Council aims to spark a national debate on super-sizing savings to double retirement incomes and is hosting a one day conference on October 14 in Auckland to discuss how to make Super and KiwiSaver fairer, more affordable, accessible and work harder for us for longer.

Mr Neilson said that FSC-commissioned research showed that New Zealanders did not believe that NZ Super alone was sufficient to have a comfortable retirement and that we needed to save to buy a second pension that would give a retirement income double NZ Super with KiwiSaver the preferred vehicle.

“We know from the research that people get the idea that they have to save if they want more than NZ Super which they say is not enough for a comfortable retirement but we are not saving nearly enough,” Mr Neilson said. “It’s a bit like the gym membership though – you meant to go three times a week but somehow time slipped away and you’re lucky if you get there three times a month!

“The trouble is that it is too big an ask for most people to save 10% of their income from next week so we’ve done some work that shows there are ways to bring that down to 7% and make a comfortable retirement affordable using KiwiSaver starting small.”

The FSC will unveil a package of options at the Future of Super conference for policymakers to consider as the basis for a new cross party Retirement Income Policy agreement that updates the old 1993 accord that will make KiwiSaver fairer, more accessible, affordable and sustainable so all New Zealanders have the opportunity to live their increasingly long lives in some degree of comfort

The Future of Super Conference speakers include OECD Private Pensions Unit Member, Stéphanie Payet, who will talk about policy trends in OECD countries to increase coverage and contributions into funded pension plans. Former New South Wales state Liberal Leader and current CEO of the Australian Financial Services Council, John Brogden, will present a case study on how our neighbours have built up retirement savings of A$1.6 trillion from their 20-year-old and evolving compulsory Superannuation Guarantee scheme. New Zealand scrapped compulsory retirement savings in 1975, a decision most New Zealanders now regret.

The conference will also feature discussions on how best to combine Pay as You Go schemes (PAYGO) like KiwiSaver and Save as You Go schemes (SAYGO) like NZ Super, research findings on middle New Zealand’s hopes, fears, needs and being resigned to KiwiSaver becoming compulsory as not a bad thing either, panels on how to make KiwiSaver affordable, fairer and more accessible for women who spend more time out of the workforce and also for employees, especially the low paid, and employers. The day will finish with expert presentations on the need for an annuity, retirement pension or drawdown facility market and a networking event.

Around 200 decision makers, financial services leaders, government officials, advisors, employers, employees, trade unions, business leaders and media are expected to attend.

To register for the conference and find out more about the programme go to www.fsc.org.nz

ENDS

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