‘It’s a bad idea to be saving the minimum in KiwiSaver’
Putting the minimum 3 per cent contribution into KiwiSaver will provide an income in retirement that is less than half of your current income — and that’s including New Zealand Superannuation, research from a new KiwiSaver provider has found.
Ko¯ura Wealth has launched its Ko¯ura KiwiSaver scheme plus research it hopes will encourage people to get advice, make sure they are in the right type of fund and are contributing enough to get the retirement they want.
Ko¯ura Wealth’s holding company is owned by Rupert Carlyon — a strategy and mergers and acquisitions expert who has worked for KPMG, Tower and Vector and Hobson Wealth — a private wealth advisory firm launched by Warren Couillault which is part-owned by Macquarie.
Ko¯ura is the third KiwiSaver scheme to launch this year and enters an already crowded market with at least 25 other providers.
Carlyon said its core difference was its advice model which would help assess people’s risk appetite and then put together an individualised portfolio based on six different underlying tracker funds.
Most other providers offer a range of funds from cash to conservative, balanced or growth funds which they can allocate members to.
Ko¯ura’s tool asks questions and then recommends a portfolio based on a percentage of the six underlying funds. It also gives people a range for how much money they could have at retirement should the markets do well and if they don’t do so well and what kind of weekly income that could give a person.
Carlyon believes the advice is sorely needed. Its research found most people see KiwiSaver as important to their retirement but less than half are in the right type of fund, based on where its tool would have allocated people to.
The research zeroed in on under 45-year-olds of which there are 1.8 million members out of the nearly 3m people in KiwiSaver with $38 billion invested.
“Our analysis shows this segment of the population has missed out on over $2.5b in returns over the past two years,” the report notes.
Around 44 per cent of KiwiSaver members contribute the minimum 3 per cent of their salary. The research found for an average Kiwi that would deliver a post-retirement income of around half of their current income, including New Zealand Superannuation — well short of the 70 per cent recommended for a comfortable retirement.
For a person earning $80,000 with a take-home income of $1159 per week after tax, a 3 per cent contribution into KiwiSaver would give them around $614 a week — including New Zealand Superannuation.
“In our opinion, a lack of understanding and advice is the large issue with KiwiSaver,” Carlyon said. “We’ve also found Kiwi’s expectations of their KiwiSaver are significantly greater than what their KiwiSaver is actually likely to deliver.”
Koura will invest in US Equities Fund, Rest of World Equities Fund, Emerging Markets Equities Fund, NZ Equities Fund, Fixed Interest Fund and NZ Cash Fund. The scheme has an annual fee of $30 for over 18-yearolds and a funds under management charge of 0.63 per cent.