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KiwiSaver membership growth analysis from TOWER Investments

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Fuseworks Media
Fuseworks Media

KiwiSaver contribution holidays on the rise Default KiwiSaver provider TOWER Investments has released its monthly analysis of the IRD's KiwiSaver member count for the month of February, 2011.

"Over the month of February, net KiwiSaver membership broke through the 1.65 million mark, even though the Christchurch earthquake of February 22 would have disrupted the labour market and distracted people from joining," said Sam Stubbs, Chief Executive Officer of TOWER Investments.

"According to TOWER's analysis, average monthly growth in net KiwiSaver membership for the six months to February 28 was 1.42%, whereas in the final three months of that period monthly growth dipped to average 1.25%," he said.

"At 1.24%, February's monthly growth fitted in neatly with the trend for the past three months and suggests that stronger growth in KiwiSaver membership may be unlikely while recession grips our economy," he said.

"Another factor of interest, given a poorer domestic economic outlook since the Christchurch quake struck, is the number of KiwiSaver members taking active contribution holidays (including active financial hardship holidays)," he said.

"Just over 56,000 KiwiSaver members are recorded in IRD statistics as taking active contribution holidays as of February 28, which represents an increase of 46% in that category over the space of a year and 3.4% of total KiwiSaver membership," he said.

"Quite conceivably the number of KiwiSaver members on active contribution holidays could increase sharply as the economy shrinks further after the Christchurch shock, with household budgets squeezed by higher rents, increased prices for food and energy, and the add-on effect of GST at 15%," he said.

"KiwiSaver members contemplating active contribution holidays because household finances are tight will need to weigh up carefully the opportunity cost of potentially smaller retirement savings later on," he said.

"If members do take a holiday, they should monitor their financial situations closely for when contributions can be resumed," he said.

"KiwiSaver was designed to be "set and forget" for regular contributors, but that could backfire for members on active contribution holidays if they forget to resume saving for retirement when they can afford it again," he said.

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