Turning retirement savings into incomePosted to Financial Capability on 26-06-2015
A new report has been launched giving the options that should be available to KiwiSaver members when they want to turn their savings into retirement income.
The work by the New Zealand Society of Actuaries adds to a review being done by the Commission for Financial Capability, as it considers policy options for decumulation.
The Society estimated that half the KiwiSaver members who reach 65 in 25 years’ time will have an account balance of $100,000 or more in today’s terms.
They will then face choices including taking their money out or making regular withdrawals to provide some income, while the bulk of their savings remain invested.
The report, Income Streaming in Retirement, said there was no ‘one-size-fits-all’ for managing money in retirement and it did not support a default option for all KiwiSaver accounts.
The Commission is working towards new ways of guiding New Zealanders to their money decisions, before and during retirement.
It has carried out a round of consultations on the viability of different approaches to the voluntary annuitisation of retirement savings.
David Boyle, the Commission’s Investor Education GM, said: “As KiwiSaver fund balances grow there is going to be greater demand for income-type solutions. On that basis we expect to see greater numbers of providers seeking to meet this market demand.
“Now is the time to consider the policy options to ensure retirees have good choices for turning their hard-saved nest eggs into income.”
Currently, KiwiSaver members can reinvest their savings into an investment that produces an income, such as a managed fund or term deposit, or draw down on the money slowly while leaving the rest in their KiwiSaver account to continue growing.
Next: A train ride conversation about wills