KiwiSaver members double returns thanks to strong markets
KIWISAVER members made $3 billion from their investments over the past year, data from the Financial Markets Authority shows.
The FMA has released its latest KiwiSaver report, which shows the total amount of investment income from KiwiSaver investments doubled in the year to the end of March, compared to the same period the year before.
That was mostly due to strong investment returns, because the value of assets invested only increased by a third.
KiwiSaver membership increased to 2.5 million, from 2.3m. Members made $2.38b in compulsory payments, with employer contributions of $1.47b and Crown contributions of $927m.
FMA spokesman Garth Stanish said the strength of financial markets over the year had boosted many investors’ accounts.
But he said KiwiSaver
members needed to be aware that was unlikely to be seen again for some time. ‘‘Investors need to be prepared for a period of lower returns and increased volatility ahead.’’
It was vital that investors understood they were in a longterm investment, he said.
‘‘You need to take a different view as to your investment than you would if it was in a bank.
‘‘KiwiSaver is still a relatively new product. People will take time to get to grips with the fact it’s a long-term investment product and choices you make today can have long-term repercussions.’’
Stanish said the FMA was keen to ensure KiwiSaver members understood the potential benefits and disadvantages of the funds their money was in. ‘‘One of the key areas of focus is engagement and making sure investors are aware of what is available.’’
A problem often highlighted with KiwiSaver is the high number of investors who are in lowrisk, often default, funds despite being a long way off needing their money. That would usually indicate they could handle a higherrisk investment, which should deliver better returns over the long term.
Just under 45 per cent of KiwiSaver assets are in low-risk investments – down from 47 per cent in 2014.
About 93,000 KiwiSaver members switched funds during the year, moving $100m from default and conservative funds.
The way members interact with their investments is also changing. ASB’s general manager of wealth, Jonathan Beale, said the introduction of mobile and internet banking facilities for members had boosted voluntary contributions to the scheme.
He said more than 230 people a day were making an online voluntary contribution.
When Chinese sharemarkets went through a volatile patch in August, the number of online fund switches spiked to 241, from a usual rate of about 50 per day. Stanish said any moves that boosted engagement were a good thing.
KiwiSaver withdrawals also increased significantly compared to previous years. First home buyers withdrew $214m from the scheme, up more than a quarter from the $169m withdrawn in the 2014 year.
Just under 9000 people withdrew $42.9m under the significant financial hardship provisions. Final withdrawals made by people over 65 were up 12.7 per cent at $422m.