New Zealanders have always been very good savers, and particularly keen investors, so for some the prospect of retirement income was largely taken care of through the ownership of rental properties, land, or investments in bonds and shares. However, for others who were not able to make the same sort of provision, they were reliant upon the New Zealand Superannuation scheme which wasn’t enough to provide a comfortable level of income.
With that in mind, July of 2007 saw a new savings scheme launched to encourage New Zealanders to put aside more money for their retirement. This scheme was called KiwiSaver, and it celebrates its 17th birthday next month. The scheme enabled working people to save a percentage of their earnings, which would then be added to by their employer and the government. Since launch the scheme has gathered popularity and stats from the Financial Sevices Council from March 2024 show that there are $100.4 billion dollars held in KiwiSaver schemes across 3.2 million members.
Members have a choice of several providers, and a selection of strategies to choose from. The most popular schemes are predominantly issued by the big banks which savers may have selected themselves or found themselves allocated into when they started work. If you have been in a scheme for several years, it is worth looking at what you have. After all you may have selected a balanced fund when the schemes opened, but maybe a growth or conservative fund would now be a better option for you. Some people may think that all schemes are much the same, but reviewing the performance and fees for the largest schemes suggests this is very much not the case. Saying all KiwiSaver schemes are basically the same is much like saying a Fiat Panda and a Ferrari are much the same as they are both Italian cars…
One thing with KiwiSaver is that the schemes are flexible so just because you are with the scheme your employer allocated to you when you joined, doesn’t mean you are stuck with it in most cases. There are lots of providers, all of whom offer advantages with costs, returns, or offer investment strategies in line with your beliefs. For example, if you prefer to invest in the latest technologies, you may find your existing scheme managers don’t feel the same way and your exposure to companies or countries in your KiwiSaver is less than you would like.
Returns are important as small differences can make a big difference. For a 21-year-old earning $50,000 today and saving 3% of their salary into an average balanced scheme with a 3% employer contribution added, they can expect to see $247,000 in their pot at 65. A simple change to a growth strategy sees this rise to $308,000 – and that extra $60,000 can make quite a difference at retirement. There are some excellent tools at www.sorted.org.nz and it’s a good idea to play around with their KiwiSaver calculator to see the difference some small changes can make.
Your KiwiSaver is arguably the most important savings scheme you will ever have. One thing we all have in common is that we will retire at some point. Why not take some steps to ensure what you have is suitable for your needs today, and maybe some small changes today can mean big improvements for tomorrow. We at Hamilton Hindin Greene are more than happy to discuss your KiwiSaver arrangements, so do let us know if you have a reasonably established scheme and we would be delighted to see if it works for you. There is a saying that “Less is More” but that doesn’t apply to the size of your retirement pot!
Both are red and both Italian but one has different reliability and one has different performance.
