Pandemic first big wobble for many KiwiSaver investors

AUCKLAND: The ‘‘March meltdown’’ was the first time many realised the value of their KiwiSaver funds could go down as well as up.

The Commission for Financial Capability — the Government’s financial education arm — took calls from people worried someone had ‘‘taken’’ their money, and some even asked what the Government had done with it, commission personal finance editor Tom Hartmann said.

Investors have been on a rollercoaster ride this year as markets tanked around the world and then bounced back, all amid fear and uncertainty about Covid19.

In late March, the S&P 500 index was down more than 33%, and New Zealand’s NZX 50 index was down just shy of 30% at its low point on March 23.

Four months later, the markets are virtually back to where they were before the crash, despite the virus remaining widespread and cases hitting new daily highs.

As well as health being at risk, the world economy is expected to head into recession this year; job losses and business closures will be ramping up for some time.

That market dive saw a record $4.5 billion wiped off the value of

KiwiSaver funds in the March quarter. The total value of the funds fell from $63.6 billion at of the end of 2019 to $59.1 billion on March 31, according to Morningstar’s quarterly fund survey.

Since then, KiwiSaver total funds under management have more than recovered to about $66 billion at the end of June.

However, that was not before some crystallised their losses, selling at the bottom and switching from growth to conservative funds — about $1.4 billion is estimated to have been moved.

For a lot of people, March was the first time they saw the value of their funds go down, and that

KiwiSaver was not a savings account, Mr Hartmann said.

The commission received calls from people panicking about what was happening their funds.

Mr Hartmann was hopeful the situation had taught people ‘‘some really good lessons about falls in values and recoveries’’.

KiwiSaver was launched in 2007. Markets fell after the Global Financial Crisis hit, but balances were small and membership numbers were also low.

On top of that, when people’s contributions were combined with their employers’ and the Government’s subsidy, balances did not take much of a hit.

Since 2009, markets have climbed steadily in one of their longest bull runs in history.

Now the average balance is about $20,000 and membership is much more widespread: about 3 million people are signed up.

Balances have become much more visible as providers offer the ability to see daily changes to one’s account online.

Many KiwiSaver members had never really been tested in a prolonged falling market, Milford Asset Management head of KiwiSaver Murray Harris said.

‘‘There has been a couple of short periods where there has been market selloffs . . . March was one of those but it recovered fairly quickly just like it did in the OctoberDecember 2018 period.’’

One upside to the focus on the falling markets was a lot more people paying attention to their KiwiSaver accounts, he said.

Markets would go down and up again in the future — those worried about that needed to focus on being in the right fund.

‘‘If you are in the right fund for your risk profile, time horizon, you don’t need to do anything — just stay the course,’’ Mr Harris said.

‘‘Then you really don’t have to worry.’’ — The New Zealand Herald