KiwiSaver membership growth analysis 

KiwiSaver sign-up rate slows during Budget month

Default KiwiSaver provider TOWER Investments has released its monthly analysis of the IRD’s KiwiSaver member count for the month of May, 2011.

“May saw continued overall increase in KiwiSaver sign-ups, with net total membership rising 1.5% for the month to break through the 1.73 million mark,” said Sam Stubbs, Chief Executive Officer of default KiwiSaver provider TOWER Investments.

“Opt in via KiwiSaver provider grew the strongest at 1.8% increase, to take membership counted by that joining type to more than 860,000,” he said.

“Coming in just behind for growth rate was the automatically enrolled by employer category, which grew by 1.4% to over 640,000, and after that opt in via employer, which lifted less than 1% to 230,000.”

“If the monthly KiwiSaver membership growth rate continues to average around 1.5% for the rest of 2011, over 26,000 new members will sign up per month, taking total membership to around 1.8 million by the end of the year.”

“The wild card was changes to KiwiSaver announced in the government’s Budget on the 19th of May.”

“There was some evidence of slowdown in KiwiSaver signup rates over Budget month, but the most affected categories were opt in via employer and automatically enrolled by employer, and these categories may be more expressive of labour market conditions.”

“Opt in via provider would have been the category most likely to have shown up as a bellwether for public concern over the impact of the Budget on KiwiSaver, but the monthly sign up rate for May was similar to April’s.”

“The Budget may make KiwiSaver a bit less attractive for people to join in the short run.”

“However, its financial impacts on KiwiSaver member accounts do not flow through until 2012 in the form of taxation of employers’ previously tax-exempt minimum contributions and halving payments of the government’s  Member Tax Credit subsidy.”   

“Perhaps more disconcerting for potential members is that KiwiSaver’s rules have been changed again by the government, which starts to chip away at certainty around retirement planning arrangements.”

“We probably won’t know for a few months yet whether the growth rate of sign-ups to KiwiSaver has been seriously impacted by the Budget.”

“Even with KiwiSaver becoming less generously supported by the government, it is still an efficient, low-cost, well-regulated retirement savings vehicle.”

Appendix: KiwiSaver at a glance for May 2011: