Rough ride ahead for KiwiSavers
Finance experts warn of volatility in 2019 but urge savers to keep calm and carry on
KiwiSaver members could face their toughest year in 2019 as forecasts for ongoing volatility in global markets could see balances fall significantly for the first time.
But experts say savers are best to stick to their guns and ride it out or risk missing out on the bounce back.
KiwiSaver performance figures for 2018 won’t be available until the end of January but some funds are likely to have had a negative year for performance, according to Morningstar’s Australasian research head Tim Murphy.
The average return for the year to September 30 across growth funds was 11.3 per cent, down on the performance for 2017 of 15.7 per cent.
And the last quarter of 2018 was an even tougher time in global markets with some markets seeing the gains of the entire year wiped out.
Claire Matthews, a KiwiSaver expert at Massey University, says some balances will already have gone down. “I think we are already seeing it to some extent,” she says. “Since KiwiSaver has come in we have had a fairly benign investment environment. We haven’t had that volatility.”
KiwiSaver was launched in July 2007, shortly before the 2008 global financial crisis, but balances were small and bolstered by the $1000 kickstart money from the Government. Matthews says the other big difference from 2008 is the number of people now in KiwiSaver.
More than 2.7 million Kiwis belong to the scheme — a massive jump up from June 2008 when just over 716,000 people were in KiwiSaver.
Matthews says a large number of those 2.7 million people don’t have any other investments so they also don’t have experience of the markets going up and down.
“They won’t remember ’87. They have just seen this really upward movement.”
Matthews says it is going to be a bit of a reality check for people. “I can see a lot of people complaining and blaming the Government.”
She predicts some will make kneejerk reactions based on the shortterm performance without getting advice.
“What they really need to be getting is advice from someone who can say ‘don’t panic’.
Ayesha Scott, a finance lecturer at AUT, says the message she would give is exactly that — don’t panic.
“Just because markets are down and returns are lower is not a reason to change your strategy.”
But she says it is a good time to look at your scheme by making sure the fund you are in matches up with what you plan to use it for.
“If retirement is 20 years away you can afford to ride out any market cycle.”
But if it is closer than 10 years you might be better to look at a balanced or more conservative fund, Scott says.
Martin Hawes, a financial adviser who chairs Summer KiwiSaver Investment Committee says sharemarket volatility is just part of being an investor and he urges people to stick with shares.
“It is certainly not a time to move out of shares.” Hawes says it doesn’t seem like a crash is imminent.
But he says there are clouds in global economy with Brexit and the trade war between the US and China. “I think the chances are this is going to mean some volatility and it will continue right into 2019.”
New Zealanders streamed their way into 2019 breaking data usage records as they welcomed in the new year.
Nationally Kiwis consumed more than 90.4 terabytes of mobile data on the Vodafone network on New Year’s Eve, compared to 64.4 terabytes of mobile data across the country during the same period last year.
According to Vodafone technology director Tony Baird, that’s equivalent to streaming 40 hours of television in only six hours.
Given Kiwis aren’t always near city centres during the holiday periods, telcos have had to invest in technology to ensure their networks remain strong across the country.
“When it comes to favourite places to ring in the new year, Kiwis tend to either gather en masse in popular areas like Rhythm & Vines in Gisborne or head out to remote baches and cribs to get away from it all,” says Baird.
“We’ve had our technology team putting in the hours over the Christmas and New Year period to make sure our customers get the same seamless experience at holiday destinations as they would at home.”
In addition to upgrading sites in more remote areas, telcos have also been innovating with cell sites on wheels (so-called COWs) to give Kiwis better online access.
However, staying connected isn’t only about the internet. Many New Zealanders also kept it old school, sending 5.53 million text messages to wish their loved ones a happy new year. That is only 11 per cent down from the 6.2 million sent last year.