Know your KiwiSaver: Your future depends on it
Twelve years after its launch, KiwiSaver has close to three million members and more than $50 billion invested. Surely, a great success in addressing New Zealand’s poor savings rates and preparing our ageing population for the future?
But to take a step back, how many readers know off the top of their head not just who their provider is but how their funds are allocated? Is your money in a conservative, balanced or growth fund — or a combination of them? And how is your provider performing in relation to others in the market?
These questions are becoming more important as Kiwis’ savings grow and they get closer to retirement. If investors always stay in a conservative fund, rather than putting some money in growth assets, they could miss out on tens of thousands of dollars by the time they retire. The level of contribution to a KiwiSaver fund will also have a big impact on the final figure.
Providers say getting people to engage with their fund is a big challenge. There has never been a better time to do so. Since the recovery from the Global Financial Crisis began, the rise of KiwiSaver has coincided with a surge in the New Zealand sharemarket. The NZX 50 has rallied 225 per cent since 2009. KiwiSaver investors with money in balanced or growth funds have been the bigger winners from this increase.
A Business Herald series this week aims to provide savers with information on how to get the best out of KiwiSaver, comparing the performance of funds and looking at what you can do if your provider is underperforming. The report cautions that past performance isn’t a guide to future performance and investors shouldn’t rush to move their money around based on provider returns.
However, a clear understanding of where your money is invested and how it is performing, relative to other KiwiSaver options, is a good place to start. Finding out this information has become easier with the launch by the Commission for Financial Capability of its Smart Investor tool.
The Government is beginning its review of the nine KiwiSaver default providers this year and has already signalled fees will be in the spotlight amid concerns of big providers clipping the ticket without doing enough to get people into the right fund. It comes as the Retirement Commission undertakes its three-yearly review of retirement income policies. This report is due to be presented to Parliament by the end of this year.
New contribution rates came in from April and, in July, people over 65 will be able to join KiwiSaver. Next year, annual statements will also include forecasts on how much savers are likely to have in their account at age 65, and what kind of income this could provide after you finish working.
More and more information is being given to KiwiSaver members but the challenge remains how to get people to use it — and make the investment decisions for a great retirement.