‘Dramatic Shift' That Could Leave KiwiSaver Members Better Off
The proportion of KiwiSaver in funds with high volatility has quadrupled in three years.
, Money Correspondent
A 'dramatic' shift of KiwiSaver investments into riskier funds should make New Zealanders better off in the long run, if past trends hold true.
The Financial Markets Authority (FMA) released research this week noting the significant shift in risk of KiwiSaver investments.
The proportion of KiwiSaver in funds that are risk category five, with high volatility, has quadrupled from 10 percent in 2021 to more than 40 percent in 2024.
Riskier funds can be expected to be more volatile but over the long term should produce better results. They are generally recommended for investors who still have a significant period of time until they need to access their investments.
Morningstar data shows that aggressive funds have returned 10.89 percent a year over five years, and 9.34 percent over 10 years.
That is compared to 3.07 percent a year over 10 years for conservative funds, 4.47 percent for moderate funds, 6.18 percent for balanced and 7.68 percent for growth.
Data director Greg Bunkall said cash investments' returns had lagged the rate of inflation over that time.
The FMA said the proportion of KiwiSaver investments in lower risk funds dropped from 30 percent to 10 percent over the same 2021-to-2025 period.
Part of this was due to the change to default funds, which now require them to be balanced. But it said there were other factors at play, too.
'In the period prior to the Covid-19 global pandemic, interest rates were historically low, and inflation was low and stable. As a result, many fixed-income assets provided low returns. On the other hand, stock markets have performed very well in most years since 2017, and the few periods of weakness quickly reversed.
'The strong performance and relative stability of stock markets may have therefore made higher-risk investments more attractive to investors. The persistence of this situation over several years may have contributed to the observed shift in preference for higher-risk investments, illustrating adaptive expectations among investors.'
It said market performance could also have affected the risk rating of funds. Spikes of volatility in 2020 and earlier this year affect funds' performance history.
A number of providers have recently launched 'high growth' funds that invest almost solely in equities.
FMA director of markets, investors and reporting John Horner said the FMA was not necessarily implying that people were in the wrong fund or that providers were advising members towards higher-risk funds.
'The observed increase in the risk categorisation of KiwiSaver funds appears to reflect a combination of factors including policy settings, investor behaviour, and market volatility.
'KiwiSaver is a long-term savings regime for retirement, and for most long term investments a higher risk strategy will be appropriate.
'We note that as KiwiSaver has been in existence for a while and become more mature there are more options available, including higher risk options, and there is also more material available to allow investors to educate or inform themselves about risk vs reward.'
Fisher Funds general manager of KiwiSaver David Boyle said the increase in investments in riskier funds was a good thing for investors wanting to grow retirement savings over the long term.
He said consumers knew more about the role of growth assets in a long-term savings scheme like KiwiSaver. Fund mangers were responding to consumer interest and providing education on the risks and benefits of different fund types.
Investors had experienced the Covid downturn and seen the recovery.
'The advent of platforms that allow investors to build their own portfolios allows providers to launch single sector specialist offerings that are often at the riskier end of the spectrum.'
He said members still had choice and there were many lower-risk and savings options available.
Booster chief executive Di Papadopoulos agreed New Zealanders were becoming more sophisticated in assessing their time horizons and figuring out if they could handle more risk to target higher returns.
'It appears people are moving to higher risk funds that align with them not needing their KiwiSaver money for retirement anytime soon,' she said.
'At Booster, we have seen the benefit of these decisions. Moving from a balanced fund to a growth fund increases projected balances at retirement significantly.
'A key factor is how soon or long in the future your might need to access your KiwiSaver, such as if you want to use it to buy your first home, or for your retirement.
'If you're unsure about whether you are in the right fund it's a good idea to check in with a financial adviser.'
How much difference might your outlook be?
Based on Sorted's retirement calculator…
A 20-year-old joining KiwiSaver now with no investment, earning $60,000 and contributing 4 percent of their salary plus an employer's contribution of 4 percent could expect to have at 65:
$381,354 in a balanced fund
$477,814 in a growth fund
$606,456 in an aggressive fund
This accounts for inflation.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Scoop
11 hours ago
- Scoop
Whanganui Heritage Buildings To Make Way For Health Campus
Heritage buildings at a council-owned site in Whanganui will be demolished and the cleared site leased long-term to a local health provider. Whanganui District Council voted 9-4 this week to lease the former St George's School site to iwi-governed Te Oranganui Trust. Mayor Andrew Tripe said the decision supported Te Oranganui's vision for a community-focused health and wellbeing campus. 'This is a community organisation with deep roots in our district. By supporting this partnership, we're making a strong statement – that public land should be used to advance public good.' The decision follows community engagement and an assessment of risks and opportunities for the site at 125 Grey Street. Tripe said the decision balanced community priorities and sound financial stewardship, along with respect for Whanganui's heritage. 'We heard strong arguments to retain the heritage buildings. 'We also had Te Oranganui present a compelling case for a future that supports our community's health and wellbeing and we are confident this will deliver long-term benefits for Whanganui.' The council had not heard any other commercially viable options for the site, Tripe said. There were more than 800 responses to a council survey on the future of the site, with 51% supporting deconstructing the buildings and leasing the site to a private developer. The council would pay the estimated $1.25 million for deconstruction from its property endowment fund, meaning ratepayers would not foot the bill. The council agreed to 'a sensitive deconstruction'. 'Our approach … respects the heritage value of the site by allowing for careful deconstruction, recovery of materials, and heritage-sensitive design in future development. 'It's not just about removing buildings – it's about making space for something new that honours the legacy of the site while creating services that will support people and whānau for generations to come.' The school's original buildings went up in 1927 but most of the buildings on the site are earthquake-prone and contaminated with asbestos, according to council reports. As part of the lease, the newer administration building facing Grey Street will remain, along with the YMCA Early Childhood Centre with access from London Street, while the older surrounding buildings will be deconstructed. Tripe said it was 'a tough decision' but there were no clear plans for future use of the heritage buildings. Bringing the site up to safe, usable standards would have cost more than $12 million. The Grey Street property was home to St George's School from 1927 until the school moved to the Whanganui Collegiate School campus. The site was bought from the YMCA in 2019 by the council's commercial arm, Whanganui District Council Holdings, as an investment. Between 2019 and 2021, it was used by the New Zealand International Commercial Pilots Academy, which proposed expanding aviation-related facilities prior to the COVID-19 pandemic. The council formally purchased the site from its holdings company in 2023. Transitional housing was initially considered for the property, but that proposal was withdrawn after strong neighbourhood opposition. Two buildings are currently leased by the YMCA, but most of the site sits unused. It currently returns a net annual loss of $49,000. The council estimated the long-term lease would deliver a net benefit of $109,000 annually. Te Oranganui is expected to move in by the end of 2027.
Scoop
12 hours ago
- Scoop
Pay Talk Protection: National Backs Labour's Transparency Bill
Members' bills from opposition MPs are more often than not doomed to fail, but there have been exceptions to the rule this term. Tracey McLellan's Evidence (Giving Evidence of Family Violence) Amendment Bill received unanimous support at its second reading, with all six parties in Parliament voting in favour. Deborah Russell's Companies (Address Information) Amendment Bill is being supported by National and ACT, but not by New Zealand First. Others, like Camilla Belich's Crimes (Theft by Employer) Amendment Bill, have passed thanks to the support of one of the smaller coalition parties (in this case, New Zealand First). But only one opposition bill has had the support of National, and only National this term, and it is another from Belich. On Wednesday night, her Employment Relations (Employee Remuneration Disclosure) Amendment Bill passed its second reading, thanks to National voting alongside the three opposition parties. The bill would ensure that pay secrecy clauses, which prevent employees from discussing their salaries with colleagues, would no longer be enforceable, meaning employers could not take legal action if an employee talked about pay. There will be cases where pay differences were justifiable (such as different skill sets or qualifications), but the bill's intention is to shed light on situations where they were unjustifiable. Australia, the UK, the EU, and some US states have either banned pay secrecy clauses or made them unenforceable. Belich said people already talk about their pay with colleagues, but stopping businesses from taking action against them for it would keep New Zealand up with the times. "It takes away the right for them to take action and discipline their employees when they talk about their pay. We know this happens already at the moment. So there's definitely a common sense, pragmatic element to this bill," she told RNZ. "It's making sure that usual human behaviour and workplace discussions are not something that people are disciplined for." Six National MPs took calls on the bill at its second reading. Every one of them referenced the gender pay gap and were hopeful the bill would be a mechanism to reduce it. Banks Peninsula MP Vanessa Weenink, who gave National's first contribution to the bill, told RNZ the party supported the bill because it had a "proud history" of driving down the gender pay gap. "We know that pay transparency is a key factor for driving down the gender pay gap. International studies have shown that when that legislation has been brought in, that it's measurable in the amount of reduction in the pay gap. So we really want to see that continue to fall down." Belich said it was great to see continued support for the bill. "I was heartened by the comments made in the house, where the National Party members said they would support this right through. I hope that's what they do," she said. "I think given the current context, where we've had significant changes to our pay equity regime, where women have had the ability to take pay equity claims severely curtailed, these types of bills, which make small changes to make a more transparent workforce, are increasingly important." Weenink said the "optics" around pay equity had nothing to do with National's support for the bill, as the party had also supported the bill at its first reading, well before the pay equity changes were announced. "It's just our ongoing commitment to doing what we can to make the workplace fair and improve productivity. How I see it is that if you can see you're being paid less than someone else who's working right beside you, doing the same job, then that's going to massively reduce your motivation, isn't it?" She did not see it as National handing Labour a win, but rather an opportunity to put party politics aside and improve things for New Zealanders. The bill passed its first reading in November. Sometimes, a bill is given cautious support at its first reading, in order to send it to Select Committee to see if the kinks are ironed out. The Education and Workforce Committee received 225 submissions on the bill, the majority in support. Belich said a number of changes were made to the bill through the Select Committee process, including making it clear there would be no requirement to make a disclosure. "It's still something that can be a private matter. It's only if you wish to that you shouldn't be disciplined for the desire to actually discuss that. So that was probably the major change through Select Committee." She said there were some definitional tidy-ups, including making it clear what the definitions of remuneration and detriment were, as well as ensuring the bill would not be retrospective. Some privileged or commercially sensitive information, for example, owner benefits for a business owner who also receives an employee salary, would also be excluded. Despite the changes, ACT and New Zealand First continued to oppose the bill. ACT said it would allow people to breach agreements they had signed up to, for which there should be consequences. "Once you've signed something, you are supposed to oblige to the conditions that you have signed for. If you do not agree to something in the agreement that you have signed, then there is an opportunity for you to go back and renegotiate the terms and conditions that you don't agree to," Parmjeet Parmar told the House. "But you don't just breach the agreement and say that there should be no consequences for that." New Zealand First's Mark Patterson said it "runs smack into the brick wall" of the party's belief in the "sanctity" of contract law. "While this bill doesn't prevent pay secrecy and that's still able to be incorporated within a contract, it does limit an employer's ability to enforce it, and that goes against what a contract should be," he said. Belich said she found the arguments against the bill "interesting," as it was specifically designed so businesses would not need to spend money to change their contracts. "If we'd said you cannot have a pay secrecy clause in your contract, or pay secrecy clauses are now illegal to have even in an employment document, there'd be thousands of employment agreements throughout the country that would need to be changed, that would cost money, that would take legal advice. It would be a burden on business." The bill still needs to go through the Committee of the Whole House stage for any further tidy-ups, and then a third reading, though Weenink did not foresee any major changes. "It took a long time to bash some of these things out, and I think we've got it to a really good place." Acknowledging National is a "broad church" and there had been strong discussions about the bill amongst the caucus, she did not expect any changes to the party's position at the third reading.
NZ Herald
14 hours ago
- NZ Herald
Backing NZ's water reform
This article was prepared by TechnologyOne and is being published by the New Zealand Herald as advertorial. Safe drinking water is something residents of New Zealand take for granted. It is not something, however, that can be taken for granted. Investing in, maintaining and managing the infrastructure to manage water is one of the most important, high-profile and fundamental responsibilities for governments at all levels. It is a challenge local authorities can continue to rise to, but only if they have the right technology at their disposal. The New Zealand Government has recognised the importance of modernising water systems management across the nation with its Local Waters Done Well policy, intended to ensure New Zealanders can have confidence in this essential service into the future. TechnologyOne is proud to have supported local authorities in New Zealand and Australia over many years, providing them with the systems they need to safely and cost-effectively build and manage water services. Our decades of success in delivering solutions to highly regulated organisations including water authorities, NZ electricity distributors and government agencies gives us a depth of experience and a set of integrated, powerful capabilities that water authorities – and residents – need to have full end-to-end confidence in any organisation providing them with their water. Our ERP Solution for Water Utilities solution combines regulatory compliance, real-time financial control and planning, supply chain management, water asset and project lifecycle management, document management, water billing, customer management, HR and payroll systems, delivered on a single platform from a single vendor. Our open platform provides API tools to facilitate GIS and SCADA integration. Even more importantly, it is delivered using TechnologyOne's pioneering SaaS+ approach which means the systems are in place within weeks, not years, with no additional implementation costs. No one does more to take the risk out of technology implementation. TechnologyOne's experience and ability to deliver results quickly is a compelling combination, considering New Zealand's new Water Done Well council-controlled organisations (CCO) are facing tight deadlines from the Government. CCOs must get their plans in place by September 3, 2025, have systems operational by July 2027, and be fully compliant by June 2028. TechnologyOne has been part of communities across New Zealand since 2000, with team members based around the country and offices in Auckland and Wellington.
