4.2 Financial planning for retirement
The KiwiSaver Act 2006 includes as a purpose the encouragement of a long-term savings habit. One dimension of developing these long-term habits might be undertaking some financial planning. Respondents aged 25 and over were asked about the extent to which they had thought about financial planning for retirement. Those answering “a lot” or “a fair amount” were grouped together in contrast to others who responded “a little” or “not at all”. Respondents were more likely to have thought about financial planning for their retirement if they were a KiwiSaver member (see Table 2). Interpreting this finding raises again the question of causality: was joining KiwiSaver a result of having done some financial planning for retirement, or was it the case that KiwiSaver members, having joined, were stimulated to undertake some financial planning? Without further tests, we can only conclude that there is an association between membership and the extent of financial planning, but the direction of the effect is unclear.
Females who are not partnered are significantly more likely to have thought about financial planning for retirement; in contrast, partnered females were less likely to have engaged in retirement planning. These differences highlight the need for detailed analysis, as in this case the combined model (pooling partnered and non-partnered respondents) showed no significant effect for females. Older non-partnered respondents were more likely to have engaged in financial planning.
| Variable | Direction and significance | ||
|---|---|---|---|
| Partnered | Not partnered | Both | |
| Number of observations | 469 | 218 | 687 |
| Respondent is a KiwiSaver member | ns | ++ | + |
| Respondent is female | - | ++ | ns |
| Age | ns | ++ | ns |
| Good health | -- | -- | -- |
| Fair health | ns | --- | - |
| Poor health | -- | -- | --- |
| Expect NZS to be main income source | -- | ns | -- |
Notes:
1. Only variables that were statistically significant for at least one sub-group are shown.
2. Sample restricted to those 25 years old and over.
3. +++ or --- significant at the 1% level; ++ or -- significant at the 5% level; + or - significant at the 10% level.
4. ns = not significant.
Two factors significantly reduced the likelihood of having undertaken some financial planning for retirement: health and the role of NZS in retirement income. Respondents were asked for a self-assessment of their health status. They were asked to select one of the following five categories: Excellent; Very good; Good; Fair or Poor. Overall, those whose self-assessment rating was below very good were significantly less likely to have engaged in financial planning for retirement. It is possible that those in poorer health may have at least subconsciously felt they had lower life expectancy as a result and therefore less need for financial planning (recalling that the result comes after allowing for the effect of income and wealth and a large number of other variables that might have confounded the association).
The second factor concerns the expectation regarding NZS as the main source of income in retirement. Those who expect NZS to be their main source are significantly less likely to have engaged in financial planning for retirement. This result is consistent with the proposition that those relying principally on NZS anticipate holding few other retirement assets, and are unlikely to be planning to save more. As a consequence they have little or no incentive to engage in retirement planning as long as they continue to expect that they will receive NZS under its current terms.
