A third of KiwiSaver members who read their annual statement this year recalled seeing their projected retirement lump sum, a Financial Markets Authority survey has found.
This year, for the first time, members’ statements included an estimated projection of how much money their KiwiSaver investments could provide at age 65, and what this would amount to as a weekly income.
Of the 34% who recalled seeing their projected lump sum 63% of them planned to take some form of action. The most common planned action was increasing contributions.
Gillian Boyes, FMA Manager – Investor Capability, said the FMA, along with the CFFC and the Government, had promoted the inclusion of projected retirement income to help prompt awareness and positive action from investors.
“It’s encouraging to see the new projection figures are starting to prompt members to act. Over half of those intending to make a change understand that increasing contributions will make the biggest difference to their balance,” she said.
Most of these members who saw the projected sum (62%) said they thought it was around, or more than, what they were expecting. However, when asked if the weekly retirement income figure would be enough to live on, only 28% said yes.
The proportion of surveyed members who noticed the fees in their statements this year increased to 55%, significantly more than 31% in the previous survey in 2018. Fees were first shown in dollar amounts in 2018.
The FMA has consistently focused on the importance of understanding the impact of fees, both pushing investors to become more price-sensitive, and pressing providers to demonstrate the value they offer to members.
Members’ responses to fees were largely consistent with 2018, with 54% saying fees were ‘about right’ and 32% saying ‘too high’.
Ms Boyes said the increasing awareness of fees this year shows it takes time for these improvements in disclosure to bed in. “No doubt this year, the fees would also have stood out against the drop in investment returns. However, the improvements to the statements introduced over the last few years, and the increasing attention KiwiSavers are paying to the fees, shows these statements are having an impact. We need to keep pushing and prompting, along with the providers, to maintain people’s focus on their KiwiSaver settings.”
Keeping up contributions a priority
Despite market volatility as a result of COVID-19, 62% of members agreed that continuing contributions was a priority, with only 11% disagreeing.
Overall readership of KiwiSaver annual statements was consistent with 2016 and 2018 surveys, with three-quarters (76%) of surveyed members reading their statements. Those who have not yet read their statement, but intend to, were more likely to be aged 18-24.