Speaking at the 2012 New Zealand Finance Colloquium, held at Massey University’s Albany campus last week, Dr Matthews said demographic characteristics had a substantial impact on the choices people made about KiwiSaver funds and retirement savings more generally.
When it came to fund selection, she found there were significant differences based on gender. Men are more likely to invest in aggressive and growth funds, while women are more likely to choose conservative funds.
“Males are risk takers, whether it’s in their choice of car or their investment fund,” she says. “But when it comes to long-term savings, risk taking can actually be an advantage.”
Dr Matthews also found that men are more likely than women to have prior savings when joining KiwiSaver. Just over half of male respondents said they had savings already, while only 38% of women did.
“These figures reflect and confirm, quite disappointingly, the difference between males and females and the level of interest they take in financial planning,” Dr Matthews says. “It’s important for all New Zealanders to be better educated about their personal finances, but this is particularly so for women.”
Other demographic factors, including age, ethnicity, education, and income, can also influence the choices being made about retirement savings. Dr Matthews found 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 were more likely to be invested 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.
Younger investors are either staying in default funds allocated by their provider, or lack the knowledge and confidence to invest more aggressively says Dr Matthews, who advises 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 are making about KiwiSaver membership, it is important for gender, age, income and education differences to be acknowledged by the government, advisors and providers, says Dr Matthews.
“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,” she says.
Dr Matthews was presenting additional findings from a survey conducted last year for the Financial Services Institute of Australasia and the Institute of Financial Advisers at the 2012 New Zealand Finance Colloquium, held at Massey University’s Albany campus.
Her original report based on that survey was titled KiwiSaver and Retirement Savings, and aimed to gauge perceptions of KiwiSaver, the importance of saving for retirement, where people obtained advice, and views on the changes to KiwiSaver in the 2011 Budget.
Picture caption: Dr Claire Matthews