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KiwiSaver members see benefits of large fiscal and monetary stimulus, as returns soar

KiwiSaver
KiwiSaver members see benefits of large fiscal and monetary stimulus, as returns soar

KiwiSaver members have enjoyed stellar returns over the past year, largely thanks to governments and central banks around the world pulling massive levers to support equity markets.

The value of funds managed by KiwiSaver providers stood at $81.6 billion as at March 31, according to the Financial Markets Authority’s (FMA) annual KiwiSaver report.

This was up 32% from the year to March 2020, and up 43% from in the year to March 2019.

“Collectively, funds enjoyed positive investment returns of $13.2 billion, a major turnaround from a year earlier, when they suffered a loss of $820 million, and up from $3.8 billion two years earlier,” the FMA said.

“It must be noted that such growth and returns for a 12-month period are not typical and can be attributed to the very specific circumstances of the recovery underway by 1 April 2020.

“In fact, when it became obvious how extraordinary some growth fund returns had been in the year to 31 March 2021, the FMA asked fund managers not to promote returns for that period in isolation, so as not to mislead investors.

“The FMA was concerned investors may form an inaccurate and unrealistic view, based on the 12 month returns, of what they should expect from investing in general; or of the skill of specific managers.”

The FMA noted a number of investors missed out on these returns, because they switched from higher to lower-risk (growth to conservative) funds when the market took a hit in the first half of 2020, only to lock in their losses.

While it said the number of switches fell by 9.3% from the year to March 2020, there were still 57% more switches than in the year to March 2019.

“FMA-commissioned research by PwC found younger people and members of bank-run schemes drove the higher level of switching,” the FMA said.

“Concerningly, the research found fewer than 10% of those who switched to a lower risk fund during February to April 2020 returned to a higher growth fund by August, meaning 90% effectively locked in their losses. Fund switching data suggests many remain in conservative funds.”

While 2020/21 was fruitful for many, it was tough for some.

The number of KiwiSaver members who made withdrawals for significant hardship reasons was up 42.8% from the previous year. While this was a large percentage increase, the value of hardship withdrawals was relatively low at $159.3 million.

Meanwhile, there was an 18.8% increase in the value of first home withdrawals, valued at $1.4 billion.

See the FMA's KiwiSaver report in full here

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11 Comments

"The number of KiwiSaver members who made withdrawals for significant hardship reasons was up 42.8% from the previous year"

Anyone else find it crazy that kiwisaver growth returns have been exceptional, and the size of the kiwisaver pie is exploding, yet the number of people trying to get out on hardship grounds is going up at 50% on the previous year?

i.e. 'i can't afford to leave my money in kiwisaver in order to get these exceptional returns'

Anyone else see the insanity in this position that parts of society find themselves in?

Perhaps sums up where we are at in the long term debt cycle.

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4

So the reason why Kiwisaver members are getting a nice return is because there are less of them to collect?

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Simple

One is a CASH requirement to live NOW

The other is book pixel dust .... leveraged to the moon and ultimately destined to return squat

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Hi Jenée, would you have a chart showing the performance of the various funds, you could share please?

 

Thanks

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Translated:  Could you please graph the dryness of the various decks?

Signed; Purser's Assistant,Titanic.

Just nuts. This is keystroke-issued debt, finding a home in shares and overblown housing, globally. What are those shares and houses really worth? Where's the real floor? All 'savings' and 'investments', are bets on the future availability of resources and energy. The question is whether they are there, tomorrow, to underwrite the numerical expectation. if not, all bets are off.

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The late Dr Cullen may have had his faults and was hardly embraced by all and sundry, including me, but at  the least he  can point to this achievement. In other words he did something to address NZr’s abysmal savings standards whereas, excluding WP’s referendum, all his predecessors did nowt but talk.

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7

his two legacy projects kiwisaver and the superfund will enhance NZ wealth in years to come, pity his other one WFF does the opposite 

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I agree, WFF is a disgrace and it must go.

I would love to see an estimate of the damage that this absurd taxation mechanism has done to the wealth of NZ investors.

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2

FTBs will have noticed that their "investment" hasn't grown at anywhere near the rate house prices have. You can't even live in a share portfolio either, which is a double whammy for them I feel as they'll still have to pay rent.

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3

My kiwisaver actually realised approximately a 50% return on investment during 2020.

My property value has increased nowhere near that in the last 3 years.

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From a longer term perspective, shares always outperform property: https://www.canstar.co.nz/kiwisaver/real-estate-vs-shares-which-is-the-….

You just need to be aware of your investment horizon: while many practitioners state that the minimum investment horizon for share investing is 10 years, I think that an horizon of at least 15 years would be more adequate. Of course you can always properly layer your overall investment strategy.

Never look at just one or two years returns when comparing investment classes.

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