Why You Should Consider a KiwiSaver Review
Like most Kiwis, you've probably got your KiwiSaver account set up. If you've been with the scheme for a while, you may have forgotten all about it or left it to do its thing.
For those just starting out, it’s perfectly fine and a great first step in strengthening your financial future—but for those “long-timers,” when was the last time you actually reviewed it?
As 2024 wrapped up, we saw a surge of market activity, with global stock markets feeling the effects of Trump’s recent US election victory. The extension of “Trump Trades” and a stronger USD meant New Zealand was quick to reflect these trends, with savvy Kiwi investors seeing a return from US equities and Generate, a leading KiwiSaver provider outperforming the market thanks to diversified strategies.
For those just starting out, it’s perfectly fine and a great first step in strengthening your financial future—but for those “long-timers,” when was the last time you actually reviewed it?
As 2024 wrapped up, we saw a surge of market activity, with global stock markets feeling the effects of Trump’s recent US election victory. The extension of “Trump Trades” and a stronger USD meant New Zealand was quick to reflect these trends, with savvy Kiwi investors seeing a return from US equities and Generate, a leading KiwiSaver provider outperforming the market thanks to diversified strategies.
With a recent cut to the OCR and another predicated set to be announced on 19 February, the BIG question remains: How do I get my KiwiSaver to work harder and deliver the best results?
Shifting interest rates and what can only be described as an interesting geopolitical landscape mean there is no time like the present to reassess your KiwiSaver investment strategy and ensure that all your investments align perfectly with your financial goals.
With 2025 here, now is the ideal time to think about your financial resolutions, like improving your KiwiSaver funds. Don’t worry, though; changes to your KiwiSaver don’t have to be stressful.
Let’s look at a few points that can help you on your journey…
Is Your Fund Type Working For You
Are you in a conservative, balanced, or growth fund? Does your fund align with your current financial goals and risk tolerance?
KiwiSaver invests in various assets; the more focused on growth, the larger portion of funds are invested in growth assets. On the flip side, the defensive and conservative funds have a much smaller investment in growth and a higher allocation in income assets.
Defensive
Created to deliver investment with a stable return over a short period. Great if you want to draw your funds within a year and want certainty about amounts -for example, a first home deposit.
Conservative
Modest short-term returns by investing primarily in an actively managed portfolio. Volatility is low to medium, and returns can fluctuate. The minimum investment time frame is 2 years.
Moderate
Returns are modest to medium over the short to medium term. Returns can vary, and the minimum investment time frame is 3 years.
Balanced
Basic return of the medium term with a recommended investment time frame of 5 years. Volatility can range from medium to high, with lower returns.
Growth
Good returns over the medium to long term. Investing is primarily in growth assets, with a minor amount allocated to income assets with the potential for higher returns. 7 years is the recommended minimum investment timeframe.
Focused Growth
Experience higher returns over the long term with high-risk investment into shares with a recommended minimum investment timeframe of 8 years.
Ethical
These are unique funds invested in a specific industry, such as sustainable energy, water, and socially responsible companies.
Earlier, we touched on the fact that Kiwis often set and forget their KiwiSaver and usually make the mistake of remaining in the default fund, which can lead to missed opportunities for growth.
What a fund change could do for you…
Imagine you’re 40 years old, earning $80,000 a year, and contributing 3% to your KiwiSaver, which is invested in an aggressive growth fund. You already have $50,000 accumulated, so by the time you retire at 65, you’ll have $486,717 at your disposal. That will provide a weekly income of $436 on top of NZ superannuation. But if you choose to invest in a moderate growth fund instead, your total will be less than half that amount, at just $240,538 – providing a weekly income of $215.
The latest Morningstar KiwiSaver Survey (September 2024) reported that high-growth funds have averaged annual returns of 9.1% after fees and before tax over the past decade, compared to 4.3% for conservative funds. This highlights how a higher growth allocation can significantly boost long-term returns.
Contributions
Are you contributing enough to achieve your financial goals? Would increasing your contributions make a big difference?
Growing your contributions by 1 to 2% can make a significant difference, especially if you want to see your funds grow.
Here’s an example of what shifting from 3% to 6% contribution would be like.
Food for thought in relation to the above…
Making a 3% extra KiwiSaver contribution would reduce your take-home pay by $2400 (59k net down to 56,600). Can you afford the $2400 savings for the increased $146,000 gain for your retirement?
Government Contributions
Have you contributed at least $1,042.86 this year to receive the full government contribution of $521.43? This will give you a 50% return on funds. To qualify, you must contribute $1,042.86 for the entire year.
The contribution also applies if your annual salary exceeds $34,762 and you contribute more than 3%. If you’re self-employed, aim to contribute approximately $87 per month or $20 per week to meet the annual $1,042.86 contribution requirement by June 30th.
Retirement Planning
A Massey University study found that a single person retiring at 65 and living to 95 will need $1–$1.2 million for a modest retirement lifestyle and closer to $2 million for a more comfortable one. The consensus is that, on the whole, this is not good news, and many individuals will, looking at their current balances, run out of money if this is all they rely on to fund their retirement.
Are you on track to have enough saved for retirement?
A review can help you understand whether your current strategy is working or adjustments are needed.
Ideally, you want your fund type selection to do the heavy lifting and maximise your returns for your retirement investment.
How to Get Started
So, when was the last time you reviewed your KiwiSaver? Maybe it’s time to make that a priority and maximise KiwiSaver for 2025!
My goal is to help you make informed decisions throughout this process. If you would like to review your KiwiSaver and look at retirement projections, it will take about 15 minutes via Teams.
Contact me, Diana McIntyre, your trusted adviser, and schedule your KiwiSaver review if you want to know what a 3% to 6% contribution would look like— Let’s work it out together!
You can either book a time (or if you would like an evening appointment, let me know, and we can arrange a time that suits you —I can even support you with a complete insurance review).