KiwiSaver – your questions answered

For many New Zealanders, their KiwiSaver account will become a key part in saving for their first home and living comfortably in retirement.

KiwiSaver can be a powerful way to grow savings with contributions from you, your employer and the government – plus the investment returns achieved – all helping to build your investment over time.

It’s natural to think of KiwiSaver as a savings account, but really, it’s an investment account. Investing can feel daunting, but it doesn’t have to be.

There are a range of tools and resources on KiwiSaver providers’ websites and if you prefer to talk it through with someone, there are professionals who can help make sure you’re in the right KiwiSaver fund for you.

Liam Robertson, a financial adviser at Milford, is one of them. He’s an expert at helping people make the most of their KiwiSaver account and he’s shared his insights on important KiwiSaver questions.

How do I make the most of my KiwiSaver savings?

Robertson: Essentially, there are two key levers you can pull to maximise your results in the long term:

• • You can increase your contributions. Many Kiwis put in three per cent of their salary or wages because that’s what their employer is obligated to match. But you can increase that to four, six, eight or 10 per cent. The more you put in, the larger the sum of money you’ll have invested which can help generate more returns over time.
  • Choose the right fund for you. In practice, this could mean, for example, considering a higher risk, potentially higher returning fund, like a growth or aggressive fund if that’s appropriate for your goals, timeframe and tolerance for risk. While these funds will naturally have more ups and downs in value over the short term, history shows they typically generate better returns in the long term, which helps you to maximise your savings over time.

How do I make sure my KiwiSaver savings are being well managed?

Robertson: You should look at the investment returns of KiwiSaver providers on an after-fee basis. This is the way most KiwiSaver providers display their returns. You’ll also want to consider the service you’re getting from your provider, the provider’s expertise in managing funds, the transparency of your provider, how easily you can see your account information via app or web portal and the fund reporting you receive, among other things.

When you call your provider on the phone, do they pick up and answer questions you may have, making you feel at ease and offering information to assist with your decision making?

How do I make sure sustainability is incorporated into how my money is being invested?

Robertson: You should be able to view your KiwiSaver account and get a good snapshot of where your money is being invested. Your provider should be clear about their approach to ethical or sustainable investing.

At Milford, we take an active engagement approach. As providers of capital to businesses we believe we can make the biggest impact by driving companies to do better. Informed by our detailed analysis, we challenge them on their sustainability targets, actions and reporting to deliver better outcomes. We’ve preformed more than 200 engagements with companies in this regard in the past 12 months.

What are the most important factors in choosing which fund type is right for me?

Robertson: There are three key factors:

• • What is your goal – are you investing for your first home or retirement? Setting a goal will keep you focused and sustain your momentum by giving you something to work towards. Knowing what you’re working towards keeps you on track when markets inevitably fall, and you may feel tempted to change your strategy.
  • What is your timeframe? Generally speaking, if your goal is further away, then you have a longer investment time horizon and you can consider taking on more risk in your choice of fund (because you have time to recover from the ups and downs of markets). Alternatively, if your timeframe is shorter, such as a near-term requirement to assist with a house deposit, then your fund choice should take this into consideration.
  • What is your risk tolerance? You need to think about how comfortable you are with market volatility, which can see your balance go up and down as markets go through cycles. If you’re going to lose sleep over that, then a higher risk fund may not be right for you.

You can find more helpful information on fund types available to you, the risks associated with particular funds and minimum recommended investment periods in your KiwiSaver Plan’s Product Disclosure Statement and on your scheme provider’s website.