Now is as good a time as any to think about how you are invested in KiwiSaver. Here are five basic points to get you started. But remember, you need to think long-term and past the issues-du-jour

Now is as good a time as any to think about how you are invested in KiwiSaver. Here are five basic points to get you started. But remember, you need to think long-term and past the issues-du-jour
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Eating healthier, exercising more and saving more money are the most common New Year’s resolutions.

There’s not too much Kiwi Wealth can help you with on the first two, but helping you to keep to the third is right up their alley.

Joe Bishop, a Kiwi Wealth manager, says the start of 2019 is the perfect time for all KiwiSaver members to assess what is one of their biggest and most important assets, and to take positive action.

“KiwiSaver is an investment and, like any investment, people need to take a look at how it’s progressing and what changes they can make to get maximum value.

“Fortunately, some of the most important things KiwiSaver members can do don’t require a lot of time or effort, rather all it takes is a little bit of understanding.”

Here are Kiwi Wealth’s top five resolutions for KiwiSaver members:

1. Make sure you’re in the right fund for you

“This is a biggie and one of the most important choices members need to understand,” says Mr Bishop. “Being in the right fund for your age and stage in life means you are much more likely to achieve your retirement income goal.”

Default funds are definitely not where you want to be long term.

“These are simple, low-risk funds that act as a holding position while members assess a fund that’s right for them, be it conservative, balanced or growth. Given they are low risk, returns are – generally – commensurately lower than most other funds. Over time, that can equate to a lot of money an investor might miss out on having come retirement. 

“As a general rule, younger KiwiSaver members should opt for growth funds, while those closer to retirement age might look to manage risk or volatility with more conservative options.”

2. Check your contribution rate

You may have had a pay rise, or the kids might have left home. You’ve got a little extra money in your pocket. Lifting your contribution rate is a good way to make sure you’re investing extra money for retirement.

Contribution rates currently are set at 3%, 4% or 8% of gross salary, with 6% and 10% options likely coming in April next year.

“Lifting how much you’re regularly investing can have a compounding effect,” says Mr Bishop. “If you’re able to lift contributions without causing hardship, it’s an effective way to reach a goal faster.”

3. Keep an eye on performance, and remember it’s a long game 

As an investment, KiwiSaver can be subject to market trends – both up and down. For all the experts that say the financial sky is falling, there are those who say everything’s just fine. So who to believe?

“What’s most important is to not panic or make rash decisions. Investment managers are always looking to balance risk and maximise returns given the conditions.

“Ups and downs in the market can represent opportunities, so staying the course may deliver rewards in the long term.”

It’s a similar situation with fees. Research by superannuation industry specialist SuperRatings showed schemes that provided the highest net benefit outcomes for members were not necessarily those that charge the lowest fees.

“The key figure is your net return, how much your balance changed versus the fees paid,” says Mr Bishop. “In our view, cheaper doesn’t necessarily mean better, nor does an expensive fund mean you’ll necessarily get greater returns. Either way, expect your provider to make fees and returns clear and easy to understand.”

4. Have a retirement income goal in mind

“We all have an idea of what our retirement looks like – perhaps regular overseas trips, a move to the seaside, making sure all the bills are paid,” says Mr Bishop. “But many people don’t have an idea of what they need to do to achieve those goals and how to stay on track to get there.”

Goal-setting is the primary purpose of Kiwi Wealth’s Future You® tool, an intuitive tool for members to manage their KiwiSaver investment.

“Future You allows people to set a retirement income goal based on their total financial situation. It shows how decisions made today might affect things further down the track. 

5. Don’t put all your eggs in one basket

Most Kiwis are unaware they are already well invested in the New Zealand market.

“Your house, your job, your bank deposits – these are already tied up in New Zealand-based investments, so considering where your KiwiSaver account is invested is important. Having it invested in international shares can provide some protection against major shocks to the domestic economy.

“This means you’re able to reduce risk by limiting investment exposure to a single market, as well as taking advantage of the opportunities available in massive global markets. For example, the New Zealand sharemarket represents just 0.2% of total OECD capitalisation.

Take a look at where your KiwiSaver scheme provider invests its funds, and understand the benefits of different investment approaches.

“There’s a whole world of opportunities out there and that’s what investors should want their KiwiSaver scheme provider looking out for, as well as those closer to home.”


* This is a re-post of an article sourced from Kiwi Wealth, one of dozens of KiwiSaver schemes. You can check the performance and assetg allocation of all KiwiSaver funds here.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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A very very important consideration for those who have reached 65 or are close to it.
There is life in KiwiSaver after 65.
I have known people to take their money out at 65 and close their account - wrong, wrong, wrong!!
KiwiSaver provides a great vehicle to invest one's money post 65.
One may want to invest a proportion of one's savings for a reasonably long term (e.g. five plus years) with exposure to more risk such as shares. A KiwiSaver growth/aggressive fund is a great way of doing this with other funds either in term deposits or a conservative fund which one can draw on in the short term as one wants (just check that your provider allows money to be withdrawn from a nominated fund).
Compared to unit trusts, there is not the entry/exit fees nor do management fees tend to be as high most likely due to their size (and there are calls for KS management fees to be reduced as funds get larger). Arguably there is more transparency and published results for KiiwiSaver Fund performance compared to unit trusts provided by the same provider so that is a positive for investors.
Post 65 one is likely to want to have funds set aside for either unexpected or emergency reasons. Again KiwiSaver is a clear winner over term deposits. In an unexpected or emergency event, to break a term deposit usually requires 30 days notice and penalties. With KiiwSaver, being 65+ one can draw money at any time and if your fund is with your bank, you can expect to see funds in your account within five days of them receiving your notice - and without any penalty. This advantage also means one can consider putting funds in a more balance account which over the medium term should have better returns than a term deposit.
The only ones possibly to disagree with this are those with a vested interest such as a bank's or other financial adviser who wont be getting commission for you using KiiwSaver as an investment vehicle rather than a scheme from which they will gain commission.

While I strongly support reviewing one's KiwSaver fund as stated in point one, given the recent performance of the equity markets over the past three months and the corresponding losses in your KiiwSaver fund, this is not necessarily the reason for currently opting out of an more aggressive / growth fund. Consider what is said in point three.
In NZ, the share market essentially recovered within a year in both the 1987 share market crash and the 2009 GFC.
Every man and his dog will have a prediction on what is going to happen to share markets over the next 12 months, but there could be good reason for sticking with that aggressive/growth fund for a little longer - even at the expense of some further loss.
Yes, if one is in a default fund, now could be an excellent window of opportunity to look to a more aggressive fund.

" there could be good reason for sticking with that aggressive/growth fund.... even at the expense of some further loss."

That's the stuff that Crashes are made of. The second you say to yourself "there may be more losses", you should be getting 'out'. Rationalising losses after the fact with 'yes, but I expected that could happen' makes decision making all the harder WHEN later arrives. And so, you stay in, and in, and in,,, until you finally bail. And guess where that will be? Unless, you again stay in, and in, and in.....until...

That's trader mentality - a kind of gambling. Or, the thinking of end-of-the-world types. Neither is a good way to think about long-term investing.

Happy New Year bw
On 14 August I posted that there were a variety of darkish clouds on the horizon AT THAT TIME (rising US interest rate, ending of QE and money fueling asset growth including housing and equities, trade wars, risks associated with Brexit, unpredictability of Trump, October market jitters, etc) and that as one who is reasonably prudent that there was good reason at THAT time to consider moving to a more balanced KS account. That I did.
So I agree with you that if there are significant and definite signs and one is likely to face losses then one should react.
However, what is going to happen to equities in the New Year? Was the brief rebound in the last few weeks of the year simply a dead cat bounce or an indicator for the coming year? While I thought the situation was clear due to a number of factors in August, it is not now quite so clear. Many of those factors still remain - markets may now have priced those in.
I think quarterly KS reports to December 30 will show aggressive funds with a losses in the order of up to 10% for the year.
So, having suffered a loss on aggressive funds, care should be taken in now changing out of an aggressive fund simply on the basis of having suffered losses. At the moment, those currently in aggressive funds need to take a long term view and currently ride with it.
There are going to be those who argue that one can't time the markets. I have now only changed funds three times since KS was first introduced (2007?); out of an aggressive fund at the outset of the GFC, back in when when QE fueled the asset markets and cash heavy funds had poor returns, and in August 2018 when I saw some uncertainty - so I am not advocating that one changes funds on a regular basis.

One last comment. I find it to be double standards when people commonly make and accept predictions on the housing market - often without reason - being made, yet if one makes a prediction as to market trends - with reason - and consequently KS, one is lambasted for doing so.
I agree if one wants to be a passive investor, stick with that aggressive fund long term. However, unlike an investment property, with a KS investment one more readily react to changes in the market outlook (without any fee for doing so); however, as noted, I am not arguing this be done on a regular basis. If one looses so be it, but I feel very comfortable with my call in August but it was simply not just luck

There are two big differences between investing in shares and property:

• You can drip feed into a fund meaning that you need to give less consideration to market timing. If you could drip feed into property I’d probably be doing that too even though I think the market has peak.
• Property is usually a leveraged investment. This significantly increases the risk and multiplies the gains/losses. One reason people think property is so great is the impact of leverage on returns.

This explains why I would have a different attitude to market timing for shares versus property. However, I do agree with the property bulls up to a point - if you are buying property for 10+ years you should be safe from losing money, although the returns for the next 10 years won’t necessarily be spectacular. Same as stocks really, I think the next 10 years will be pretty ho hum.

Oh, I forgot the negative cashflow. If you are buying an investment property where you have to put in $100-$200 per fortnight that is just dumb. Shares never take money from you beyond your initial investment which makes it easier to ride out the hard times.

The NZ Share market recovered within a year after 1987? This article from Brian Gaynor states that as of Sep 2017 the NZ market was still 8% below its 1987 high. So didn't recover in 30 years. The changed it to a non capital index to try and hide the fact.

https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=119...

Humbug Printer8

The NZ Share Market was decimated in 1987 - it has never recovered - it is now less than half the size it was in 1987

I was very young in 1987 but best I can tell the sharemaket then was about 50% bubble and 50% scam. So you can’t apply that experience to investing in shares more broadly. Plus, I imagine most of the people who lost large amounts of money in 1987 got in 1987 or 1986. Im happy to be proven wrong but I’m sure buy and hold investors from 1983 probably recovered any losses from their initial investment quite quickly.

Recovered Losses from 1987 - oh-dear

Hardly - many of the companies imploded and collapsed. Any money invested in the high flyers was lost completely never to be recovered - I still have to this day share certificates of companies I never heard from again - and they weren't minnows

While I agree the use of a non-capital index is rather deceiving, the fact the NZX-50 companies pay dividends and this is a huge part of the NZX returns is relevant. Almost every company in the NZX-50 pays dividends, and many are >8%. ( A quick check looks like only ~5 or 6 companies in the NZX-50 didn't pay dividends this year). If you had re-invested those dividends then your capital would have grown rather nicely.

Compare this to the large caps US companies, like Amazon which AFAIK has never paid any dividend at all. The S&P 500, 100 companies don't pay dividends, another 200 odd pay <2%.

To be fair, you need to compare both indices on a total return basis to make it a fair comparison.
You may as well compare a rental negatively geared investment that generates no income and needs constant propping up from the landlords own income with a positively geared investment property.

I have some bank deposits in a foreign currency. That is another option not mentioned above.

I’m in an aggressive managed fund and it has dropped 10% recently. Couldn’t care less, I’m only interested in the balance 35 years from now.

Staying in the Cash Fund. As the main benefit of KS is the employer contribution, the Govt ‘tax credit’ and the lock-in aspect.
Changing from 3% member contribution to 4% - is it worth it?

Only if you think that managed funds (with their associated fees) will do better than your chosen alternative. And its locked in so you can't retire early on that scheme.
But in general, when I was putting my money into Govt super, it was 6.5% plus whatever the fictitious amount was that the govt should have been putting in as well. So 3+3 is actually very very low.

Hi Uninterested
Like you I had Govt Super - a scheme we are unlikely to see the likes of again. At the time a generous government contribution (some say to off set low public servant wages).
However the best parts are: defined benefit, backed by Act of Parliament, inflation adjusted, government as payee - cant get more secure than that.
Those ex-public servants who withdrew thinking that retirement was too distant an event to worry about are now very, very seriously deeply regretting it. Similarities to those who ignore KiiwSaver - currently the best retirement savings option.

True. I worked with some who didn't see it as a priority. Talk about stupid. And of course its closed to new members now. The best thing: if you had contributed for 10 or more yrs, when you leave the public service, you can start getting payouts from age 50. Beauty.

Yes. Good to increase your contribution. 8%at least. Add in some lumps when you can.

I don't normally do NY resolutions except for this year. I am finally going to get my NZ citizenship & passport after living here for 27 years.

"God of Nations…"

Congrats in advance. Main benefit as I understand it is they’ll give you a little kiwi figurine with your certificate, plus you’ll be able to buy large areas of farmland without Overseas Investment Office approval. And if you can do the latter already as a resident, I guess it’s just the figurine.

Congrats. It will give you the opportunity to have dealings with the finest of all NZ bureaucracies: the passport office. Easily the fastest government organisation and also very pleasant people to deal with. The NZ passport is one of the safest when travelling too.
It has taken you 27 years to come to a sensible decision so I will be wary of following any hurried advice you give in future.

Congratulations Yvil.

Hope you live up to the spirit of being a kiwi..;)

Yvil, how do you feel about swearing allegiance to the Queen?

Thanks BLSH, Lapun, Printer8, PP2F, Ginga, much appreciated. Other benefits include ease at immigration and option to live in OZ (although that is not my intent). PP2F I've been Kiwiising for 27 years, I'm not there yet but I'll keep trying. Lapun. A Swiss passport (which I will be able to keep) is not too bad to have anyway. Ginga, allegiance to the queen, not so much although I should thank her, as when I got paid out for my red zoned land in Chch after the EQ, I had to sign a Sale & Purchase Agreement where I was the vendor and her majesty the Queen was the Purchaser (no joke)

Yvil. My Kiwi husband told me that the citizenship ceremony involved swearing allegiance to the Queen!? What whatt? Is he winding me up?
Queenie does own a lot of land and everyone else wants a safe haven in NZ so i'm sure she owns a chunk of NZ still too haha

Yep. It's the queen Ginger. Do it and enjoy joinig the team.

I became a New Zealand citizen in the 1970s. At that time all new citizens also became British subjects, detailing this on the certificate, which amused me as I was an Englishman. I think this changed after 1982 when the British took away the subject status of Commonwealth citizens.

Nevertheless the Queen is still our head of state so swearing allegiance to her is reasonable. We are not a republic!

I'm already quite attached to Her Majesty, but i'll swear allegiance to her again if she pleases ;-) can't wait to be able to become a fully fledged Kiwi. Few more years to wait yet though.

Personally don’t have or need KiwiSaver but for most it is a good thing as they wouldn’t save for retirement!
There are going to be many who panic when they see that their KiwiSaver bakances got an absolute hiding over the last and next few months!
Housing does not go thru the large swings that equities do and that is why housing investment done right will always return you better results!
Hope everyone has a great year and don’t worry about property investors as most will do very nicely!
I am more worried about the equities!

Well personally Man I like been given $500 free every year for the last 11 years plus the $1000 start up grant. Anyone who tells me they don't need free money is a fool I reckon.

Anyway back to the beach and perhaps a cold Parrot dog.
Happy New Year

20 years? KS not that old.

Correct typo now fixed

Yep, if you really don't need the govt's money then you can give that portion away to a charity of your choice.

I'd consider property investment but the thought of then having to end every post sentence with ASC(33) rather puts me off.....

It's not a 'long game' if you need to withdraw fund for a house deposit.

Nailed it. The majority of first home buyers are counting on growth stocks to fund their deposit. Good luck to them.

Retired three years ago. Thought long and hard as to where to invest our hard earned savings. In the end, opened a share trading account and invested in a very select few, good paying dividend companies on the NZX, looking to average 7% gross. 3 years later, last year averaged 10% gross in dividends. The share portfolio, up 40% which is a bonus. Shares are very liquid, sell some, money in the bank a couple of days later. Eggs in one basket, probably, but it suits us just fine.

If you're going to play the long game, either do the work to manage your own retirement savings or buy an ETF. Most Kiwisaver managers can't even match the market, let alone beat it, over the long term. If you're leaving it up to someone else you're losing.

KiwiSaver a long term investment therefore invest in growth funds as they perform the best over time. Cash funds are a waste of time. Invest in growth and ignore the volatility in the short term

...again, it depends how long you are planning on being in Kiwisaver for. Many will use their balance to buy a first home. They are not in a position to merely ride out volatility. Not everyone has the same risk profile.