Kiwis can now choose to save more for their retirement, with new options of 6 or 10 percent available from April, but so far only a handful are using them.
A KiwiSaver survey conducted by ASB shows that while around 6 percent of people saving under ASB's scheme have taken advantage of the new contribution rates, more than one third (38.5 percent) are still contributing the minimum 3 percent.
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The survey also showed that 41 percent of ASB KiwiSavers are contributing more than 6 percent of their income and 64 percent think they need to save more.
Aidan Vince, head of KiwiSaver at ASB remains optimistic that more people will switch to the higher rates in the coming months.
"It's really encouraging to see some New Zealanders have already begun to look at whether these new options would help them reach their savings goals faster.
"These new rates have only been available for a few months so we're expecting more people to switch in the coming months," he said.
Tom Hartmann, managing editor at the Commission for Financial Capability (CFFC) said, while savers can now get more out of KiwiSaver, the new rates are for employee contributions only (employers are still required to contribute 3 percent before tax).
"The new contribution rates are for employees making contributions and [you aren't] required to contribute these new rates."
Whether savers need to increase their contribution amount comes down to their retirement goals and the Sorted retirement planner is a useful tool.
"Taking into account people are living longer, it's useful to check the numbers to make sure you're saving and investing enough," Hartmann said.
To illustrate the potential increase in savings by increasing KiwiSaver contributions from 3 percent to 6 percent, Murray Harris, Head of KiwiSaver at Milford Asset Management said that a 30-year-old earning $50,000 per year who invests in a balanced fund returning around 6 percent would be $235,000 better off in retirement.
- 3 percent contribution: $615,000* at age 65
- 6 percent contribution: $850,000* at age 65 (difference between 3 and 6 percent contribution: $29 per week)
*Savings are estimates based on today's dollars.
Amanda Morrall, Head of Communications at Simplicity said the higher contribution rates are helpful for increasing savings, whether they be for a first home deposit or to enjoy a comfortable retirement, but personal circumstances will dictate how much savers put in.
"If you're carrying high interest debt and struggling to make daily living expenses, it probably doesn't make a lot of sense to be paying more than the minimum of 3 percent.
"If you have the income and it doesn't negatively impact your budget, it may be appropriate to target a higher optional rate."
Morrall said that one size doesn't fit all and there are no benchmarks on contribution rates however, world-wide, the accepted savings target is about 10 percent of income.
"In Australia, employees are paying 9.5 percent and [the contribution] is moving to 12 percent over the next few years."
For those saving for a deposit on a first home and looking to buy soon, a conservative fund is more likely to support these goals whereas, longer timeframes allow savers to take on more risk.
"If you have a longer time-frame for investing, and you accept the risks that come with volatility, then a growth-oriented fund may be suitable," Morrall said.
Kiwi savers who care about the effects of climate change and environmental causes might like the fact that Simplicity KiwiSaver funds exclude fossil fuel extraction stocks and around 15 percent of contributors' investment fees are donated to a charitable trust supporting environmental causes.
People aged 65 and older can now join KiwiSaver and those who are still working can benefit from the new rates.
To help people save for retirement, the Government contributes 50c for every $1 contributed to KiwiSaver, up to $521 per year.
To receive the Government contribution, people need to contribute at least $1,043 per year, or just over $20 per week.
"The new contribution rates [make it] easier to contribute enough [money] to get the Government incentive - people will reach $1,043 that much sooner," Hartmann said.
The KiwiSaver contribution options are now 3 percent, 4 percent, 6 percent, 8 percent or 10 percent.