KiwiSaver

ASB has generated a new KiwiSaver calculator projecting the savings Kiwis could have to draw on when they reach retirement.

ASB’s KiwiSaver calculator allows KiwiSaver members to take charge of their own KiwiSaver savings, demonstrating how slight adjustments to contributions and fund selection can impact total KiwiSaver savings available at retirement.

ASB’s quarterly ASB KiwiSaver Scheme survey reveals 61% of people believed they need to save more for retirement, with the largest proportion believing they will require $30,001 – $50,000 each year of retirement.

Three-quarters of respondents were not sure how long they will be retired for, but those that did estimate it would be around 22 years.

ASB general manager of wealth Jonathan Beale said while many New Zealanders were now enrolled in KiwiSaver, continuing to educate people about how it worked and whether they were on track to meet their retirement goals and sustain their lifestyle was essential.

“It’s easy to enrol in KiwiSaver and forget that it’s actually an investment that needs to be monitored and regularly reviewed, particularly as personal situations change. In many cases contribution amounts are circumstantial, and what was suitable at 25 is often vastly different at 45,” Beale said.

Making regular contributions and understanding the various investment options available were among the best ways to maximise the amount of money available at retirement.

In conjunction with the calculator, ASB will be releasing a series of communications, targeted at educating customers around making the most of their membership in KiwiSaver.

ASB’s KiwiSaver calculator is the latest addition to the suite of online ASB KiwiSaver Scheme tools that enable members to self-manage their retirement savings. These include fund-switching facilities, investor profiling and the ability to top up your ASB KiwiSaver Scheme account directly. Members can also convert True Rewards dollars earned on an ASB credit card into ASB KiwiSaver Scheme contributions.

“The great thing about our calculator is that it gives members ownership of their KiwiSaver savings, enabling users to look ahead and see how much income KiwiSaver could potentially deliver them in retirement,” Beale said.

“A few simple calculations will demonstrate the difference in the end-amount when the fund option is changed, the regular contribution rate is increased and one-off contributions are taken into account.”

All existing and new KiwiSaver members can use ASB’s KiwiSaver calculator.

KiwiSaver’s first-home withdrawal function is a practical solution and a reflection of the reality of New Zealand house prices, providers say.

Members are able to withdraw some or all of their KiwiSaver funds to purchase a first home after at least three years’ saving.

That has been criticised in the past by those who said it worked against the aim of the KiwiSaver product, which is to provide money to help fund retirement.

As more people buy homes later in life, they have less time to recover from wiping out their retirement savings to fund a deposit.

In 2013, AMP said the Government should review the first-home scheme.

It argued savers should only be able to withdraw any savings they have made above the minimum salary contribution.

“The first-home withdrawal feature of the KiwiSaver scheme is incongruent with the concept of a long-term retirement savings vehicle,” AMP wrote in a submission to the Ministry of Business, Innovation and Employment on the KiwiSaver default fund system.

But AMP’s general manager of investments and insurance, Therese Singleton, said she believed it was a necessary function of the scheme.

“You’ve got to remember that before we had KiwiSaver, we had nothing. It allows people to experience the value of saving and it’s reflective of the reality, particularly in the Auckland market, of how hard it is to save for the down payment on a house. While it’s not purist the sense it is a retirement savings scheme, it does have a lot of value in educating people on the value of saving.”

She said it was then up to the provider to ensure they continued the relationship with people who withdrew money, so they would not stop saving once the house was bought.

David Beattie, of Grosvenor, agreed. He said it might encourage some people to join and it was likely that they would start contributing again once they were in their first home.

“On balance it’s not a bad function. If they did not have KiwiSaver, they would be saving frantically in another vehicle and not contributing anyway, at least this way they get top-ups and tax credits. It establishes the discipline.”

KiwiSaver funds with more assets invested in growth assets shone in the December quarter, Morningstar analysis shows.

The research house has released its latest quarterly KiwiSaver report, which covers the final three months of 2015.

It showed a big difference between conservative and more risky options: The average return over the quarter for conservative funds was 0.69%. For aggressive options, it hit 4.4%.

“Kiwis saving for their retirement benefitted from favourable market performance in the final quarter of last year, despite significant market turbulence, with growth-oriented funds doing particularly well,” Morningstar Australasia manager research analyst Elliot Smith said. “Over the past year, every KiwiSaver fund on our database posted a positive return.”

Many KiwiSavers benefitted from the performance of the New Zealand equity market, which fared much better than its global counterparts through the December quarter.

The NZX finished the year up 13.5%. The Australian market wasn’t as strong: the S&P/ASX200 Index gained 3.1% over the quarter and 4.1% over the year in New Zealand dollar terms.

The New Zealand dollar’s depreciation helped unhedged KiwiSaver investors achieve a 13.2% return from global equities over the entire year, although the Kiwi dollar appreciated against the AUD and USD over the fourth quarter, particularly in December.

While the MSCI World Index gained 6.2% in the December quarter, the result was a 1.4% loss in NZD terms.

BNZ was the top-performing KiwiSaver provider during the final quarter of 2015.

It benefitted from fully-hedged exposure to international equities and its top-performing Australasian equities investment. Milford and Generate remained among the top performers in the balanced and moderate categories respectively.

Over the whole of 2015, the funds in the aggressive category gained most from the strong performance of growth assets, posting an average return of 11.4%.

The conservative category’s average return was 6.07%.

Generate was the standout provider over the 2015 year, its three funds either at the top or second on the table within their respective categories.

Aon Russell and ANZ remain at or near the top of most categories over longer-term timeframes, and are the most consistent performers across the board. Kiwi Wealth continues to be a top performer in the aggressive category, and Milford is comfortably atop the balanced category.

A one-off enrolment of all salary and wage-earners who are not KiwiSaver members would likely cost more than it would deliver in benefits, a Treasury report says.

The report, prepared for Finance Minister Bill English last year, has been released under the Official Information Act.

The Government has previously said it intended to carry out a one-off enrolment day once it returned to fiscal surplus.

People would be given the opportunity to opt out if they did not want to be automatically enrolled.

It was designed to tackle the problem of people who had not got around to signing up to KiwiSaver.

Last year’s removal of the $1000 kickstart incentive for all new KiwiSaver members made the move a  cheaper one to implement.

But Treasury said the case for one-off enrolment was diminishing as time went on and more and more of those who would be captured by the exercise enrolled any way.

“Weighed up against the costs, the benefits for national saving and individuals’ saving of a one-off exercise are minimal.”

Analysis by the Treasury and Inland Revenue in 2011 found that one-off enrolment would increase membership by around 330,000 individuals and thereby boost the 1.6 million membership by 20%.

But since 2011, the rate of enrolment into KiwiSaver has been high and exceeded officials’ expectations. The total membership is now 2.5 million and 1.4 million of them are  salary and wage earners.

A one-off enrolment exercise would only boost membership by 5% to 7%, the report said.

The economic costs of a one-off enrolment exercise amount to $4 million for implementation; $10.4 million, being the 20% deadweight cost for four years of subsidies (for a 1 July 2016 exercise); and unspecified costs on individuals, employers and KiwiSaver providers which could be minimised in the scheme design.

But it said the exercise could have benefits if it was part of a wider campaign to raise awareness of the scheme, which could prompt members to consider their fund choice and engage the large number of people who do not make enough contributions each year to receive the member tax credit.

It wants groups working together including the Commission for Financial Capability, Ministry of Business Innovation and Employment (MBIE), the Financial Markets Authority and Inland Revenue to develop a KiwiSaver awareness strategy.