KiwiSaver has enjoyed huge success since it began in 2007, far exceeding participation expectations and quickly becoming an important part of New Zealand.  However, a new report by the University of Auckland's Retirement Policy and Research Centre casts some doubt on the scheme, suggesting it has done very little to improve household savings and support the New Zealand economy.

There are currently over two million KiwiSaver members, a number far greater than Treasury's initial projection of 680,000 members by June 2014.  According to the latest quarterly KiwiSaver Survey by Morningstar, KiwiSaver assets have grown by just as much, rising from NZ$954.10 million on 30 June 2008 to NZ$17.62 billion on 31 December 2013.

While this phenomenal growth rate is very impressive, according to a new report into the scheme by Auckland's Retirement Policy and Research Centre, it is not enough.  "Simply citing that there are 2.2 million members and $19 billion in the scheme doesn't actually tell you anything," said the report's author Michael Littlewood, adding "It just tells you that KiwiSaver's popular - and why wouldn't it be, with the incentives that it has."

According to Littlewood, there is simply no way of knowing whether New Zealanders would have saved just as much money had the scheme not been available.  In fact, Littlewood shows that managed funds, including KiwiSaver, accounted for a smaller proportion of household financial assets in September 2013 than they did in 2007 when KiwiSaver started.  At the end of 2013, KiwiSaver funds under management accounted for just 7.5 percent of financial assets.

While the money is now under one banner and easier to measure, Kiwisaver is currently a "relatively insignificant influence" according to Littlewood.  The popularity of KiwiSaver may be impossible to ignore, but the practical advantages on the ground are minimal and problems are often ignored due to the incredible growth rate of the scheme.

Statistics analysed by the Retirement Policy and Research Centre also suggest there is less money coming into the New Zealand economy than originally thought.  According to the report, the high proportion of funds in cash or overseas investment suggest KiwiSaver is not supporting the local economy. Households also increased their debt levels from NZ$101.7 billion in 2003 to NZ$199.9 billion in 2013, a factor that may have helped finance members' personal contributions.

According to ANZ's Retirement Savings Confidence Barometer from late last year, over a third of people don't know their long-term savings balance in KiwiSaver.  "Of those who did know their balance 52 per cent were confident of reaching their retirement savings' goals while only 41 per cent of those who did not know their balance were confident... People seem to be remaining detached from their retirement savings and the steps they could take to help them achieve their goals." said John Body, managing director of ANZ Wealth New Zealand.

KiwiSaver is an incredibly popular savings scheme, and a great way to manage funds leading into retirement.  However, while impressive participation rates are hard to ignore and the amount of money invested in the scheme continues to grow, perhaps the size and inclusive nature of KiwiSaver makes it hard to see any potential shortcomings.