The KiwiSaver scheme could accrue enhanced value to all stakeholders with better management based on demographics and gender, an expert has said.
According to Massey University Centre for Banking Studies financial planning director Dr Claire Matthews, gender plays a significant role in the process.
“Men and women are making different choices about their retirement savings, which could lead to very different investment outcomes,” she said, speaking at New Zealand Finance Colloquium 2012 held at the Albany campus of the University last fortnight.
As a part of her address, she presented the additional findings of a survey conducted last year for the Financial Services Institute of Australasia and the Institute of Financial Advisers.
Influencing factors
She said demographic characteristics also influenced people’s choice of KiwiSaver funds and retirement savings.
Men are more likely to invest in aggressive and growth funds, while women may choose conservative funds, she said.
“Males are risk takers, whether it is in their choice of car or investment fund. But when it comes to long-term savings, risk taking can actually be an advantage,” Dr Matthews said.
Her study found more than 50% of male respondents saying that they had prior savings while joining KiwiSaver, compared to 38% of female respondents.
“These figures reflect and confirm, quite disappointingly, the difference between males and females and the level of interest they take in financial planning. It is important that all New Zealanders are better educated about their personal finances, but this is particularly so for women,” she said.
Dr Matthews said that other demographic factors including age, ethnicity, education and income could also influence the choices made about retirement savings.
The age equation
She said that those with bachelor and higher degrees and those in households with a pre-tax income of $100,000 or more were more likely to choose aggressive and growth funds.
“On the other hand, both the youngest and oldest age groups are more likely to invest in conservative funds. While this might be appropriate for the life-cycle stage of older investors, it might not be so appropriate for younger, longer-term investors,” she said.
In terms of her study, younger investors were either staying in default funds allocated by their provider or lack the knowledge and confidence to invest more aggressively.
She advised all investors to seek advice about the best choices for their individual circumstances.
“With demographic characteristics playing such an important role in the choices people make about KiwiSaver membership, it is important that the government, advisors and providers acknowledge gender, age, income and education differences.
“It means that KiwiSaver is not a ‘one size fits all’ option, and it is important to manage its promotion and its structure to meet the varied needs of the population,” Dr Matthews said.
