10 Years of KiwiSaver: KiwiSaver Check-Up
As KiwiSaver turns 10 years old, we’re taking some time to help Kiwis understand how choices made today, can make a big difference to the future.
In the second blog in our series, ASB senior wealth economist Chris Tennent-Brown looks forward to Kiwis starting to develop a greater awareness of financial markets and the assets they hold through their KiwiSaver investment.
As an economist, about ninety per cent of the questions I get asked in social settings are about what is happening in the housing market. Several years ago I was working in Australia and while I would get the odd housing market question, the main thing people wanted to pick my brains about was financial markets (where securities such as shares and bonds are traded) and which investments were hot.
Kiwi’s love of property is well known, so it’s not a surprise that our investment focus is closely linked to what’s happening with bricks and mortar. The different focus across the Tasman, I believe, comes down to the fact Australians have had compulsory superannuation for some time now, which has encouraged their broader awareness of investments and financial markets in general.
A great start for New Zealand’s KiwiSaver Scheme
New Zealand celebrates the 10th birthday of KiwiSaver this month, and we can all be proud of where the scheme is at, at the end of its first decade.
More than 2.7 million New Zealanders are enrolled in KiwiSaver with $40 billion invested. If you thought the first decade was all about getting underway, it has been a sound start.
Of course, there’s always room to improve. A criticism often raised is the ‘set and forget’ mentality of a large number of KiwiSaver members who remain in the default, conservative funds where they were automatically placed when they first joined.
Engagement continues to be a challenge, and getting people to understand how their fund works, and how the different asset classes (such as shares or fixed income) that relate to those fund options perform.
You may not be interested in the share market, but for many members it’s a good idea to understand how share markets work because they impact your KiwiSaver balance if you’re in a fund with exposure to shares – such as moderate, balanced and growth funds for example.
As KiwiSaver enters its second decade, I look forward to more New Zealanders developing a greater awareness of financial market performance and the assets they hold through their KiwiSaver investment.
At the very least, as balances grow the impact of financial market performance becomes more visible to KiwiSaver members. That’s because, as balances get larger with time, growth will be driven more by the return of the fund’s assets (e.g. the share market), than by contributions alone.
That’s when you get to understand what really drives investment growth, and become aware of the associated risk, and how much of that risk you are comfortable to take on as an investor.
It’s my hope that in ten years’ time, when we celebrate the 20-year anniversary of KiwiSaver, New Zealanders will have a much deeper knowledge and understanding of all the different investment options available, and even more Kiwis are better positioned for their retirement by having more money saved.
I’m sure in 10 years’ time, I’ll still get plenty of questions about housing, but I hope to have just as many about what’s trending in investment markets from keen KiwiSaver members, interested to know what’s driving growth in their funds.
Even if you’ve been in KiwiSaver from the start, it’s still good to be reminded of these four simple, but powerful steps you can all take to help make the most of KiwiSaver.
- Get started
- Be in the right fund
- Maximise the benefits
- Keep checking
That may sound obvious, but you need to be in it to grow your savings, and you have to keep contributing.
Be in the right fund
Typical fund options include cash, conservative, moderate, balanced and growth.
Have you got the right assets that are really going to grow your balance as much as possible, given your savings goal and amount of time until you need to access your money?
ASB’s latest KiwiSaver survey reveals some 62% of people surveyed don’t think they are saving enough for retirement. With this being the case, understanding how much you need to save and what fund to be in to help meet that goal, is critical. Online tools and calculators can help explore what fund could be appropriate for you.
Using an online tool such as our Help Me Choose tool or the ASB KiwiSaver Explorer tool, available in branch, can help you understand the fund that’s most important for you. It can also help you understand how the different asset classes for each fund could perform.
Maximise the benefits
KiwiSaver data shows nearly 131,000* KiwiSaver members are currently on a contributions holiday, which means they are not receiving any employer contributions or the annual Government contribution (MTC) of $521.43 they could be eligible for.
To be eligible for the full MTC, members must contribute at least $1,042.86 between 1 July and 30 June each year and be 18 years or older, not yet eligible for retirement withdrawals, and be living mainly in New Zealand
Make sure these benefits are being maximised - It’s there for you, why wouldn’t you grab it?
* KiwiSaver Monthly Statistics (as at 31 May 2017), Inland Revenue
This step is often forgotten, but it’s important you continue to check steps two and three for the rest of your employment life. Even after that, investment decisions don’t stop when you stop work – you will continue to make fund choices through your retirement as well.
To make checking your KiwiSaver investment easier, ensure you’re set up online. With ASB you can track and manage your KiwiSaver account through FastNet Classic.
Look out for more in our 10 Years of KiwiSaver blog series.
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The content discussed here is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial advice. As individual circumstances differ, you should seek appropriate professional advice.
Interests in the ASB KiwiSaver Scheme (Scheme) are issued by ASB Group Investments Limited, a wholly owned subsidiary of ASB Bank Limited (ASB). ASB provides Scheme administration and distribution services. No person guarantees interests in the Scheme. Interests in the Scheme are not deposits or other liabilities of ASB. They are subject to investment risk, including possible loss of income and principal invested. For more information see the ASB KiwiSaver Scheme Product Disclosure Statement available from ASB’s website and the register of offers of financial products at www.business.govt.nz/disclose (search for ASB KiwiSaver Scheme).