15 Jun 2012

NZers able to draw on KiwiSaver accounts from July

9:17 am on 15 June 2012

The future sustainability of National Superannuation and how much will be needed to retire comfortably have been in focus this week.

Mercer Consulting has agitated for change for some time, arguing the financial impact of the ageing population could dwarf the global financial crisis unless steps are taken soon.

But Mercer New Zealand head Martin Lewington warns another issue is coming to the fore, with people being able to start drawing on their KiwiSaver accounts from July.

Mr Lewington says while the initial numbers are low, participants and the wealth management industry need to start actively thinking about how payouts will last the majority of a retirees' lifetime.

He says from 1 July there will be 75,000 people with KiwiSaver accounts who have the opportunity to withdraw their KiwiSaver balances.

Mr Lewington says KiwiSaver is there as a long term retirement savings vehicle and there should be the ability to meet savers' needs and provide an income from their KiwiSaver accounts.

"So what is missing is an annuity type product or a draw down type product. I know ... there's very few annuity providers in New Zealand and they are expensive".

But he says the industry needs to look at what's an accumulation product and turn it around to a draw down type product.

Mercer wants the Government to lift the retirement age to 67, consider postponing the receipt of National Super in return for higher payments later and for firms to offer older workers more flexible hours and job sharing options.

With the number of recipients on national super set to more than double from 500,000 to 1.3 million by 2050, Mercer argues delaying retirement could save billions annually.