KiwiSaver works out good in the long, long run

Look for what you will get at 65 this year

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Wellington, June 3, 2020

KiwiSaver investors will see how much money their KiwiSaver investments could provide at age 65 when they open their annual statements this year.

Launching a campaign to help KiwiSaver members interpret their statements, Financial Markets Authority (FMA) Chief Executive Rob Everett and Retirement Commissioner Jane Wrightson said that the new information would help people focus on how much money they may have when they retired, and what this would amount to as a weekly income.

Long-term investment

Mr Everett said that KiwiSaver is a long term investment proposition and hence it can be difficult for people to visualise how much the money they contribute today will, or could amount to at retirement.

“To make it easier for people, this year’s statements include a projection of how much money each KiwiSaver member may have when they turn 65. Of course, this is not a guarantee but is based on some assumptions to be applied across all member statements. While some may be pleasantly surprised at how much they could potentially have at age 65, others might want to make some changes to boost their retirement savings,” he said.

Mr Everett said the statements were arriving when many investors in balanced or growth funds have seen a negative fund performance for the year to March 30, 2020, because of a sharp downturn in financial markets associated with Covid-19.

Negative territory

“KiwiSaver is nearly 13 years old and most investors are used to seeing their balances head continually upwards. There has only been one other time – the Global Financial Crisis (GFC) a decade ago – when KiwiSaver balances were impacted this negatively. Therefore, this will be unfamiliar territory for many. After an unusually long period of growth in asset prices, it is fair to say KiwiSaver members have been given a crash course in the risks and the volatility in investing over the last few months,” he said.

Ms Wrightson said that retirement may seem a long way off for many, and that has what made KiwiSaver a long game.

“KiwiSaver investments in shares and property can swing up and down, sometimes dramatically, but historically deliver better returns over the long term. Find out which fund is the right one for you and stick with it – you’ll reap the rewards in years to come,” she said.

Information and questions
Important information that you will find in your statement this year are (a) Estimated potential retirement projections as a lump sum and converted into a weekly income (b) Contributions (c) Investment gains or losses (d) Tax paid and (e) Fees paid in dollars

Those with KiwiSaver account should take a look at their statement and ask themselves these questions: (1) Am I happy with the amount of money I will have at 65 – does it fit with what I think I will need in my retirement? (2) Am I in the right KiwiSaver fund to deliver what I think I will need? (3) Am I getting good value from my KiwiSaver provider – do their fees seem reasonable, do I have good access to the information I need? (4) What would happen to my projected end balance if I could afford to contribute more?

Important tips
Remember these important tips: (a) There are lots of different tools on the FMA and Sorted websites to help people (b) For anyone starting to accumulate sizeable balances and wanting to plan for their retirement, we encourage people to seek financial advice.

Mr Everette said: “We understand that many people could be struggling in the current economic conditions, but always remember that KiwiSaver is a long-term investment – keeping contributions going even through tough times, if at all possible, will have a big impact on what you get out of it at 65 and beyond.

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