The windfall we didn’t notice
Last year was the best year ever for KiwiSaver – but did you notice?
ASB has put out its latest KiwiSaver survey, which shows that, although it was an exceptional year for the sharemarket and many KiwiSaver members would have made thousands in returns, New Zealanders largely seemed not to realise.
It said its ASB scheme had returns ranging from 7.3 per cent in the conservative fund to 20 per cent in the growth fund after fees and taxes.
The NZX returned 30 per cent over the year.
But only 13 per cent of New Zealanders who responded to the bank’s survey said they thought KiwiSaver was the best bank product from returns.
By comparison, bank term deposit rates are about 2.5 per cent.
‘‘Part of the reason sharemarkets had such outsize gains last year was that they were coming off a pretty heavy drop at the end of the fourth quarter which had a lot of people nervous,’’ said ASB head of KiwiSaver Aidan Vince.
‘‘Even taking that recovery aside, the performance has been really strong over the last year, and we know this would have been similar across a number of other KiwiSaver providers.
‘‘Given that it has been a phenomenal year for returns, it is disappointing that this does not seem to be having a huge impact on perceptions,’’ he said.
On top of the market returns, most people in KiwiSaver would also receive employer contributions and up to $521 a year from the Government.
‘‘People are in KiwiSaver and getting the benefits but not quite noticing it.’’
He said there would be far more attention paid if balances slipped.
‘‘The average balance is now about $20,000 so that is an investment return of $4000 in the year [in the growth fund].’’
People with bigger KiwiSaver balances would notice even bigger boosts. ‘‘If you had a $1 million balance now worth $1.2m, you could tangibly appreciate it.
‘‘It would seem that three months is good enough for the housing market sentiment to turn around but the best year ever does not seem to be having the same boost for KiwiSaver confidence,’’ Vince said.
He said people should check in to see how their KiwiSaver fund went last year and understand why each fund was performing in the way it was.
‘‘Making sure the fund you are in is the correct one is important, because the difference between the returns from a low-risk cash fund through to the higher-risk growth funds are significant and, accordingly, the fund that is chosen will make a big difference to an investor’s retirement savings.’’