KiwiSaver

Many New Zealanders have the mistaken belief that once they get to 65, they have to pull their money out of KiwiSaver, AMP New Zealand’s general manager of investments and insurance, Therese Singleton, says.

She said leaving money in KiwiSaver through a retiree’s decumulation phase offered more freedom and potentially better returns than term deposits.

“In the past, many retirees have favoured term deposits because they are easy to understand and viewed as low risk. With the AMP KiwiSaver Scheme we have a great investment alternative for people over the age of 65.”

In the last financial year, the AMP KiwiSaver Scheme Conservative Fund earned 8.2% returns and for the same period, one-year term deposit rates for the major banks ranged from 4-4.35%.

Interest rates and returns from KiwiSaver scheme provider conservative funds may vary from year to year, but Singleton said KiwiSaver also offers retirees additional benefits.

“Unlike a term deposit, where you may have to wait for 31 days to take your money out, once you reach 65 you can make partial or full withdrawals from your account whenever you need to as long as you have been a KiwiSaver member for five years,” she said. “You can also continue to make contributions should you decide to return to work but what many people don’t realise is that once you reach 65, if you leave KiwiSaver, you can’t get back in. Maintaining your KiwiSaver membership into retirement means you can keep your options open.”

She said KiwiSaver was one of the few products that had its fees formally regulated, so it offered good value for money compared to other investments such as managed funds.

Even people who were nearing  retirement could join the scheme,  collect member tax credits for five years and then be left with an effective and affordable product to help them manage their retirement income, she said.

Some would need to change their fund to a more conservative option if they were reliant on their KiwiSaver funds but other retirees could opt for a riskier investment and treat it as an investment vehicle for part of their retirement plan.

“Plus, with a scheme like the AMP KiwiSaver Scheme, you have access to professional expert advice that your bank may not offer. Your AMP adviser is there to help you choose the right fund for your age and risk profile and to help you to make the most of your savings.”

ANZ is calling on other employers to do their bit to help women achieve better outcomes through KiwiSaver.

The bank announced yesterday that it would continue to pay employer contributions to its employees’ KiwiSaver accounts while they are off work on parental leave.

ANZ general manager of human resources Felicity Evans said the move was part of its Wise Women campaign, which aims to raise awareness of the imbalance between men’s and women’s retirement savings outcomes.

The bank says Kiwi women retire with about $60,000 less than men, on average.

Evans said: “We have done this because we do not want our staff to be penalised for taking time out to raise families. This is a first for New Zealand and we hope it encourages other companies to also consider how they can support their employees in saving for their retirement.”

ANZ has more than 9000 staff, with about 200 on parental leave at any one time. It provides 16 weeks of parental leave on full pay and will increase that to 18 weeks from next year, topping up the paid parental leave available from the IRD.

The median net worth of women aged 45 to 64 is $146,100, compared to $167,300 for men of the same age.

At retirement, ANZ estimates women will have an average $144,000 to last them just over 20 years. Men will retire with an average $203,000 to last 17.3 years.

The average balance for women in the ANZ KiwiSaver schemes is just under $9000, 28% less than the male average. Two years ago, the gap was 26.5%.

ANZ general manager of wealth products and marketing Ana-Marie Lockyer said the type of fund women chose could also affect their outcomes.

Only 10% of women surveyed said they did not mind higher volatility if it meant better returns over time: “More women than men are in our conservative funds and this can have a big impact on financial outcomes over the long term. The maths shows that women could be $90,000 worse off by remaining in the conservative fund over the long term,” Lockyer said.

The KiwiSaver top-up applies to any ANZ staff taking parental leave from October this year.

Retirement Commissioner Diane Maxwell welcomed the move. “This is the kind of innovation that shows what a key role employers can play,’ she said.

Morningstar has given silver ratings to a range of AMP KiwiSaver funds.

It awarded the rating to its aggressive, growth, moderate balanced, moderate, conservative and balanced funds.

It is the second year AMP KiwiSaver funds have received silver ratings.

Bronze, silver and gold ratings indicate the level of conviction Morningstar has in recommending a fund. It can also rate funds neutral and negative.

Morningstar said AMP KiwiSaver has one of the most impressive multisector investment teams in the market.

“Although performance has gotten the wobbles in recent years, we continue to believe the team will deliver long-run risk-adjusted returns that better most peers,” analyst Elliot Smith said.

Morningstar recently gave neutral ratings to ASB’s balanced, conservative, growth and moderate funds.

Smith had praise for Peter Verhaart, head of AMP’s New Zealand’s multi asset group.

“Verhaart is supported by head of investment strategy Keith Poore and chief economist Bevan Graham, they form an accomplished partnership. Verhaart is focussed on strategic positioning and manager research, while Poore concentrates on dynamic asset allocation and Graham on macroeconomics. Their deep investment thinking and grasp over the investment process induces confidence.”

He said AMP had a focus on long-term returns and could be less opportunistic than other managers.

Advisers whose clients are worried about the possibility of a market correction should encourage them to stick with the KiwiSaver fund they are in, new research shows.

Actuarial firm MJW has released a report looking at the impact of a market correction on KiwiSaver funds.

It says booming stock markets over recent years have sparked concerns of a major market correction in the near future.

“A risk identified is that members in a growth option or similar will suffer a significant negative return, causing them to switch to a more conservative option and then sit in this fund in future, suffering further reduced returns as a result.”

The firm compared two hypothetical funds: a growth fund with 80% in growth assets and a conservative fund with 20% in growth assets.

It used employee members earning $70,000, who started saving in 2007.

It assumed a market correction starting October 1, resulting in 27% losses for the growth fund and 9% for the conservative.

In that situation, the correction reduced the growth fund by $14,000 to $43,000 and the conservative balance by $2000 to $47,000.

“While the growth KiwiSaver member emerges from this correction in a worse position, the momentum it had already built up in the years leading up to it means its position is not markedly worse off than the conservative member who was shielded from the brunt of the loss,” the report said.

The growth fund’s balance would then overtake conservative again in 2019 and accelerate away as time went on.

MJW said members who chose a more aggressive investment style should be focused on the long term and wait out any correction that occurred.

Actuary Mark Weaver said investors who were worried about the possibility of a downturn should be told it was better to stay where they were because timing the market accurately would be next to impossible. “If you switch and markets do fall, when do you switch back?”

He said growth investors could lose money in the short term but would still come out ahead in the long run.