Changes to KiwiSaver – what do they mean for you?

by | 2 May, 2019 | KiwiSaver

The Government has recently proposed some changes to KiwiSaver for next year.

More contribution rates for employees.

At the moment you can contribute at 3%, 4% or 8% of your pay.

From 1 April 2019, it’s intended that you’ll also be able to contribute at 6% and 10% of your pay.

This gets the big tick from us as it gives you more flexibility over the amount you save.

Perhaps review your level of contributions when you receive a pay increase, it’s a great time to take the opportunity to save a little more.

Savings suspension timeframe reduces

‘Contribution holiday’ changes its name to ‘savings suspension’.

From 1 April 2019, it’s intended that the maximum period for ‘savings suspensions’ reduces from 5 years to 1 year.

If you want to continue with a savings suspension then you’ll need to apply to Inland Revenue each year to renew it.

These two changes also get the big tick from us. A ‘holiday’ generally means good times, stopping your retirement savings might not be the best thing for you in the long run. During this time members also miss out on the government’s contributions of up to $1,042.86 each year (that’s potentially $5,214.30 over 5 years).

Removing the age 65 restriction on joining

At the moment people over 65 cannot join KiwiSaver. From 1 July 2019, it’s intended that the age 65 restriction on joining is removed and the 5 year lock-in period on joining is also removed. There is no change to the age at which you qualify to withdraw your KiwiSaver savings, this remains age 65.

This gets another big tick from us. KiwiSaver will be open to all New Zealanders and provide a convenient and cost-effective investment option to just holding your savings in a bank account or on fixed deposit.

From our perspective, it’ll also allow New Zealanders over 65 to join our Christian KiwiSaver Scheme and have access to investment funds invested under an ethical investment policy.

Investment returns to 31 March 2019

Investment returns to 31 March 2019

by | 2 May, 2019 | Investment

It has been a very positive and pleasing quarter, a relief for most after the very shaky end to 2018, and a reminder to investors to focus on the longer term. Good returns were achieved by the funds in all periods to 31 March 2019.

The rebound in markets is put down to a number of factors including a reversal in the US Federal Reserve’s monetary policy stance, hope for a positive outcome in the U.S.-China trade deal negotiations and hope for further stimulus from the Chinese government, all factors that may lead to an increase in global growth in the second half of 2019. Given elevated asset prices and risks to future growth projections, we remain cautiously invested but alert i.e. we will be keeping an eye on economic data in the upcoming quarter to see it is strong enough to justify further gains.

Investment returns at 31 March 2019, before fees and tax:

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Investment returns to 31 March 2019

Investment returns to 31 December 2018

by | 1 Feb, 2019 | Investment

The December quarter saw a sharp drop in the value of shares which resulted in negative performances for the Growth and Balanced Funds. Strong performances in earlier times, however, ensured that returns remained positive in periods greater than 1 year.  While our funds performed better than most for the quarter (reflecting our more conservative investment philosophy), negative performances are never nice to experience and can be frightening. However, they need to be kept in perspective i.e. remember the great and stable returns leading up to them! Diversification benefits were also evident in the quarter as gains on income assets (bonds) partially offset losses on growth assets (shares).

It’s important when there’s been a significant drop in the markets not to be alarmed. Remember that returns are generally positive over longer time frames. Interestingly, since 1 January this year share markets have rebounded significantly (by about 7% in January).  What caused the bout of volatility throughout the December quarter? Even though a number of the concerns had been around for a while investors got more nervous in the quarter about some items including China and U.S. trade war developments, Brexit, global growth and monetary policy (particularly in the U.S.).

Large fluctuations in asset prices will inevitably occur again. In this more volatile environment, we remain extra vigilant, diversified and cautious in our approach to investing your monies.

Investment returns at 31 December 2018, before fees and tax:
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We have two important messages for you. Firstly, again, don’t panic and secondly make sure you are in the investment fund that best suits you. Changes in the investment markets don’t change your investor type. Changes in your personal circumstances are what influence your investor type.

Over time investment markets will have their ups and downs and occasionally the downs are large enough to result in a negative return. The December quarter is just one quarter. In the last 20 quarters (5 years), our Income Fund has had 18 positive quarters, the Balanced Fund had 17 and the Growth Fund had 16.

Investment returns to 31 March 2019

Investment returns to 30 September 2018

by | 4 Dec, 2018 | Investment

September was another bumper quarter for investment returns. Equity markets continued to soar with the NZ and global share portfolios returning 7.4% and 7.3% respectively for the quarter. The performance of the lower risk bond portfolios was more mixed but with small positives still being achieved. This all means that the Growth and Balanced Funds performed more strongly than the Income Fund in the September quarter.

Investment returns at 30 September 2018, before fees and tax:

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Post-September we have seen some significant gyrations in market performance. October has sometimes been a more volatile month for stocks and 2018 was no exception. Exactly what drove a significant downward adjustment in equity markets is open to debate, but fingers generally point to increased concerns about global trade, European and emerging markets uncertainty and an increase in worry about global growth prospects, inflation and rising interest rates. The early part of November has seen some reversal of this impact. However, the volatility continues and we imagine it could become a regular feature in markets.

We will continue to keep an eye on the situation and remain vigilant. We do not consider it necessary to alter our investment strategy at this point but will if we perceive things have changed and consider it desirable to act.

It is tempting for members to react when market volatility increases. Unfortunately, that’s not always a good idea and we encourage you to look through short term movements. However, what is good to do from time to time is to check you are in the right fund for your risk appetite and the length of time you have until retirement.

Getting back into a savings habit is good for you

Getting back into a savings habit is good for you

by | 27 Jul, 2018 | General

In a recent NZ Herald article Retirement Commissioner Diane Maxwell said “I was terrible with money, I didn’t think I was going to live to grow old.” She went on to say “I look back and I could weep over all the money I’ve wasted.”

How many times have you said something similar to yourself? Or are thinking why bother saving for retirement?

But it can be hard to restart saving when there are so many other demands on your income. Here are a few reasons why getting back into a savings habit is good for you.

Pay yourself first

“Pay yourself first” is one of the pillars of personal finance and considered a golden rule by many financial planners. The basic idea is simple. As soon as you get paid, put some of your pay into your savings account(s). You do this before you pay your bills or buy groceries.

Paying yourself an amount that works for your budget is one of the easiest ways to get saving. Saving small amounts can make a big difference to getting ahead. It also has good physiological benefits. When you prioritise savings, you’re telling yourself your future is the most important thing to you, not that takeaway coffee. While money cannot buy happiness, it can provide peace of mind. By moving savings to the front of the queue, you’re able to set money aside before you rationalise ways to spend it.

By making your savings automatic, chances are you won’t miss the money as it grows in its own separate accounts. You might put some of these savings into KiwiSaver for the long-term and some into another savings account for shorter term goals and unexpected financial bumps.

It’s never too late to start saving.

Sources: www.investopedia.com and sorted.org.nz/guides/paying-ourselves-first

What money are you missing out on by not contributing to your KiwiSaver account?
  1. The annual Government contribution,
  2. If you’re an employee, your employer’s contributions, and
  3. Lost investment earnings.

If you would struggle to meet your financial commitments if you restarted regular contributions from you pay to KiwiSaver, then consider making regular small payments throughout the year to be at least be eligible for the government’s annual contribution. You can still make these contributions direct to your KiwiSaver scheme provider while you are on a contribution holiday. You’ll need to contribute $1,042.86 (that’s about $20 a week) to qualify for the maximum government contribution of $521.23. You can also contribute less than this and still qualify for a lower government contribution.

Financial wellbeing

Most New Zealanders are confident in their ability to manage money but about 25% have no cash savings, according to recent ANZ research exploring the financial knowledge, attitudes and behaviours of adults in Australia and New Zealand.

Starting to save, even a small amount, is one of the most important factors for people feeling higher financial wellbeing.

This research grouped the surveyed New Zealanders in the following four groups:

What is meant by ‘financial wellbeing’? Commonly agreed components of financial wellbeing are:

  • Being able to meet financial commitments
  • Having resources to enjoy life
  • Having the ability to cope with unexpected financial shocks, and
  • To feel in control and satisfied with your current situation while having positive views and plans for your financial future.

Financial wellbeing will be different for everyone.

The research also showed financial wellbeing was not based solely on income or wealth but feelings and expectations about a current and future financial situation. People could have relatively high levels of financial wellbeing without necessarily having a high income, and vice-versa.

What is consistently found in a variety of research on financial wellbeing is that the most important behaviours were active saving, not borrowing for everyday expenses and restrained spending.

People are generally fitter and healthier in their 60’s and 70’s than the previous generation and more are keen to keep working longer. While many were still working because of the value and satisfaction it gave them, nearly a third of Kiwis still working after 65 say they have to do so to pay the bills.

The government paid pension, New Zealand Superannuation, is $400.87 per week after tax for a single person living alone ($20,845.24 pa). There are different NZ Superannuation rates for your different living arrangement, go to the Ministry of Social Developments website for more information.

It’s never too late to start saving.

Sources:

  1. ANZ: Financial Wellbeing: A Survey of Adults in New Zealand April 2018
  2. BNZ Financial Futures research: https://blog.bnz.co.nz/2018/04/the-unexpected-secret-to-a-happy-retirement/
Investment returns to 31 March 2019

Investment returns to 30 June 2018

by | 26 Jul, 2018 | Investment

Another positive quarter ensured that solid returns were reported for each of the funds in the quarter ended 30 June 2018. The benefits of diversification were evident with lower returns on bonds being more than offset by exceptional returns for shares. Christian KiwiSaver Scheme also invests in unique asset classes like forestry, mortgage loans to Christians and select private equity investments which over the long run have further diversified and enhanced returns.

Whilst many uncertainties exist, the mood remains upbeat – particularly in the US where corporate profits are strong – and positive sentiment may continue for a time yet despite the reported potential for trade wars, higher inflation and reduced growth. Other significant influences in the quarter included ongoing Brexit discussions, political developments (e.g. the Italian election), and denuclearisation dialogues.  Given the many uncertainties and current elevated asset price levels we continue to invest cautiously with a focus on quality assets, i.e. those that have a greater chance for preserving capital whilst also providing a fair return on that capital.

Investment returns at 30 June 2018, before fees and tax:

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