Investment returns at 30 June 2020

Investment returns at 30 June 2020

The quarter ending 30 June 2020 saw a welcome bounce back to strong positive returns, following the initial global reaction to the COVID-19 pandemic in March. The positive were primarily influenced by investors around the world regaining confidence as governments delivered sizeable economic stimulus packages (like we have seen from the New Zealand government). The most recent announcement came from the European Union who announced a €750b COVID-19 recovery plan. Further packages are expected to be announced. Aiding the positivity is that several countries have made headway in containing the virus and that the development of a vaccine is well underway with some early trials showing promising results.

In addition to government spending, the positive outlook was also helped by the expectation that interest rates may remain low for years. Investors were prepared to look through some negative headlines (e.g. reported economic statistics and political developments) and instead focus on the potential for better economic activity particularly as several economies planned to re-open. The commonly quoted USA index the Dow Jones was up a staggering 18% in the quarter.

 

While we welcomed the rebound in the quarter, we remain focussed on the long term investment horizon for our members. Through Christian KiwiSaver Scheme’s cautious investment strategy (focussed, diversified and with capital preservation in mind) our members have been shielded from the recent extreme market movements to some degree. Going forward, in the short term at least, we expect that asset prices will remain volatile (i.e. go up and down).

Investment returns at 30 June 2020 (before fees and tax) were as follows:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 9.3% 5.5% 9.2% 8.8% 8.7%
Balanced Fund 6.9% 5.0% 7.4% 7.3% 7.5%
Income Fund 2.6% 3.8% 4.0% 4.2% 4.6%

Not already a member of Christian KiwiSaver Scheme? Join other like-minded Kiwi Christians growing their savings ethically today!

Membership of the Christian KiwiSaver Scheme is offered only to:

  • employees of organisations whose primary activities are in our opinion Christian mission or ministry. This includes employees of charitable entities associated with or operating in the Christian Church, or employees of entities which we approve as having a Christian special character; and
  • persons who express a Christian faith and have a commitment to Christian community involvement when applying (and their immediate family members and dependants).

Christian KiwiSaver Scheme is managed and issued by The New Zealand Anglican Church Pension Board (trading as Anglican Financial Care). The Product Disclosure Statement and Fund Updates are available under Documents.

Different KiwiSaver scenarios for different life stages

Different KiwiSaver scenarios for different life stages

We have put together a couple of scenarios based on different life stages. First, we look at how a younger investor may view their KiwiSaver investment, followed by someone who is looking at retiring sometime in the next couple of years.

 

Scenario 1: I am in my mid-30s and am in a ‘growth’ fund.

At Christian KiwiSaver Scheme we have three funds members can choose from, and you can select one fund or a combination of all three depending on your risk appetite and goals. For example, if retirement is still some years away, you may consider leaning towards a growth fund.

However, this choice may also be affected by your approach to life. If you tend to grow nervous every time the market changes, your attitude towards ‘risk’ might not suit a growth fund. Growth funds can be described as higher risk but with the potential for higher returns.

You should also factor in your own personal circumstances. A lot of people choose to be in a growth fund to maximise the time their investment has to perform before they retire. However if you think you may need to make a first home withdrawal in the next couple of years, it may pay to look at a mix of funds that give you a more conservative investment profile to minimise the impact of any significant market movements in the short term.

It is important to be aware that if you switch funds while the markets are down, you will likely lock in any losses you’ve already seen. What does this mean in simple terms? If the market bounces back, you may not see the benefit from that bounce back to the same extent you would if you had not switched funds.

Prior to COVID-19, a lot of KiwiSaver providers had seen a sustained period of good returns. While you may have seen a drop in returns at the start of the COVID-19 pandemic, we have since seen the market rebound strongly from the lows that were seen. History tells us that markets tend to recover, though they may undergo change and not look the same as they once did.

We recommend that you take a look at the ‘Investor Kickstater’ calculator on sorted.org.nz, which will help you better determine what fund you might want to be in. It will ask a couple of simple questions around what life stage you are in, your income, your debt and your security etc.

Remember that there is no one answer for everyone, but if you are able to understand your risk appetite better, you are more likely to be able to find the right fund to suit you.

Scenario 2: I am nearing retirement and my KiwiSaver is currently split into different funds

A different view would be given for someone who is approaching retirement compared with someone in their mid-30s; however, it’s still important to review your appetite for risk. If you are in a growth fund and you will think you will need the money within the next few years there may be insufficient time for your investment to recover from a market decline.

If you do not need access to your KiwiSaver balance immediately at age 65, and you have a higher appetite towards investment risk, you may want at least some of your money invested in more risky assets classes such as shares.

Note that you can choose to have regular payments from your KiwiSaver account paid to you after age 65 at regular intervals. This means that the money you don’t need access to immediately can continue to benefit from being invested. If this is something you would like to look into, you can contact our team for further information on how this can work for you.

There isn’t one scenario for everyone. Therefore we recommend that you take a look at the ‘Retirement Planning’ tool on sorted.org.nz to work through how much you want to aim to have to live on throughout your retirement years. This will help give you an idea of your projected balance based on your circumstances.

If you are currently approaching the age at which you wish to retire, you may want to seek advice from a financial advisor if you have access to one. Your KiwiSaver balance could be one piece of your retirement equation, and you will want to make sure that all parts align for a happy retirement.

Not already a member of Christian KiwiSaver Scheme? Join other like-minded Kiwi Christians growing their savings ethically today!

Membership of the Christian KiwiSaver Scheme is offered only to:

  • employees of organisations whose primary activities are in our opinion Christian mission or ministry. This includes employees of charitable entities associated with or operating in the Christian Church, or employees of entities which we approve as having a Christian special character; and
  • persons who express a Christian faith and have a commitment to Christian community involvement when applying (and their immediate family members and dependants).

Christian KiwiSaver Scheme is managed and issued by The New Zealand Anglican Church Pension Board (trading as Anglican Financial Care). The Product Disclosure Statement and Fund Updates are available under Documents.

Responsible investing

Responsible investing

What is responsible investing?

What is responsible investing and is it just another piece of jargon that is difficult to understand and bears no relation to our day to day life? At Christian KiwiSaver Scheme, we believe that responsible investing is an important foundation for choosing the investments that we undertake on behalf of our members.

Looking at it straightforwardly, responsible investing could be compared to shopping for eggs in the supermarket. When you find the eggs on the supermarket shelves, you are confronted by a range of different choices – bio organic eggs, paddock eggs, free-range, caged, cage-free, barn raised, etc. The selection is vast and comes with a range of prices to match your choice. So how do you choose? Would you buy solely on the price going for the cheapest eggs no matter what? Would you prefer organic eggs? Or perhaps you are concerned for the chicken’s welfare and would not select eggs from caged chickens?

On a personal level in the egg scenario, if animal welfare is an ethical concern for you and you respond by choosing free-range eggs, you could be considered to be behaving like a responsible investor.

On a broader level, when you (or your KiwiSaver provider on your behalf) are investing responsibly, you are considering investments which reflect your values and take into account how companies manage their responsibilities, for example in their dealings with the environment or the community.

You may recall either working for or hearing about, companies that were out to maximise their profit no matter the cost. However, over recent years, there has been a move to balance the interests of shareholders with other concerns such as social and environmental welfare.

There has been a big change in our supermarkets with plastic bags being replaced by reusable ones. There had been community concern about the effect that plastic bags were having on the environment due to the sheer numbers going into landfills and turning up in our waterways and oceans. This concern about the impact on our environment influenced the government to put laws in place to reduce the amount of plastic being used.

As a community, we have become interested in a variety of social and environmental issues, and this has translated into broader concerns about where KiwiSaver funds are invested. At Christian KiwiSaver Scheme we seek to avoid investments in products such as tobacco, guns and other arms manufacturing, gambling, and adult entertainment. How companies behave with regard to the environment, their employees and others, and the way they govern themselves are also things we think about when making investment decisions for our members.

Not already a member of Christian KiwiSaver Scheme? Join other like-minded Kiwi Christians growing their savings ethically today!

Membership of the Christian KiwiSaver Scheme is offered only to:

  • employees of organisations whose primary activities are in our opinion Christian mission or ministry. This includes employees of charitable entities associated with or operating in the Christian Church, or employees of entities which we approve as having a Christian special character; and
  • persons who express a Christian faith and have a commitment to Christian community involvement when applying (and their immediate family members and dependants).

Christian KiwiSaver Scheme is managed and issued by The New Zealand Anglican Church Pension Board (trading as Anglican Financial Care). The Product Disclosure Statement and Fund Updates are available under Documents.

Investment returns at 31 March 2020, before fees and tax

Investment returns at 31 March 2020, before fees and tax

What a quarter! It may be disappointing if your balance has declined with the negative investment returns, however, it should be remembered that the last quarter is just that – one quarter – and that your KiwiSaver account has benefited from an extraordinary run of positive quarters in recent years. In fact, returns for the last 12 months (and longer) across all our funds are positive. Nevertheless, it is timely to assess if your investment portfolio is aligned to your personal situation. We have a useful article on our website that may help you with this if you are unsure.

How did the markets react to Covid-19?

International markets were highly volatile throughout the last quarter due to the impact of Covid-19. As an indication of the large and sudden movements we saw across the last quarter, we have attached the following graph of the Dow Jones index (the commonly referred to USA equity index) which fell 27% from the end of February to late March i.e. in only about three weeks! It then rose by about 30% in the next three weeks. However, this was still about 15% below the December 2019 year-end level (The Dow Jones fell 23% in the quarter). A similar picture to the Dow Jones index has been seen across other markets around the globe.

What has the response been from Governments around the world?

We have seen a number of different responses from Governments around the world ranging from how quickly they reacted to addressing Covid-19 through to the type of level restrictions that they have adopted to fight the virus. Despite the different approaches in how they have handled lockdown restrictions, one thing that is being seen across the board is the large sums of money being spent by governments in an attempt to keep their economies turning over. This has been the case for the New Zealand Government with further announcements still expected.

When can we expect market volatility to stabilise?

Judging by the rebound in shares (at the time of writing April 2020), investors seem to think the worst has passed. It could be said lockdowns are easy to go into but very hard to come out of in terms of economic recovery. We think many uncertainties still remain and that there are probably more questions now than answers, not just with regards to the virus, but concerning the short term and longer-term economic impacts.

This health crisis is also an economic crisis. Will a successful treatment be developed, and when? How long might the lockdowns last? What steps need to be taken to get back to some normality? Will the new normal look different?  How will the debt that Governments are taking on be repaid?  Answers to these, and many questions, will be very relevant to investment decisions. Nevertheless, judging from history, the global economy will inevitably recover from this crisis.

We are constantly mindful of the environment in which we operate. As had been noted many times in the past within our commentaries, our investment strategy in recent times has been focused first and foremost on protecting your investment. Our experienced in-house investment team was already concerned about high share prices. Your funds will have benefited in the past quarter from this cautious approach.

You can rest assured that we are vigilantly monitoring the situation daily and managing your fund the best we can as we continue to navigate our way through these unique times.

Investment returns at 31 March 2020, before fees and tax:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund -9.6% 0.0% 6.0% 6.9% 7.4%
Balanced Fund -6.6% 1.4% 5.3% 6.1% 6.7%
Income Fund -0.8% 2.8% 3.4% 3.7% 4.3%

Are you paying the right amount of PIR tax?

Are you paying the right amount of PIR tax?

Some of you may be asking what’s a PIR and what does this mean for me?  Your PIR is your Prescribed Investor Rate. For KiwiSaver schemes, this is the tax rate that applies to investment earnings allocated to your KiwiSaver account.

There are three PIR rates: 10.5%, 17.5% and 28%. As a general rule if your taxable income is above $48,000 then your PIR should be 28%.

It’s important to have the correct PIR. If your PIR is too high then you will be paying more tax than you need to. If your PIR is too low then you could be facing a tax bill.

Has Inland Revenue been in touch with you about your PIR? In 2019 Inland Revenue identified 450,000 New Zealanders who they determined were on the wrong PIR. Inland Revenue contacted those who appeared to have a PIR that was too low and advised how much tax they owed.

Inland Revenue replaced their computer system and that means it can now check your PIR against your personal taxable income. Your PIR is based on your income. If your income changes (up or down), this might mean a change in your PIR. Your residency status can also affect your PIR. Inland Revenue can also now let your KiwiSaver provider know if it looks like you are one the wrong PIR rate.

We have put a one-page guide together that may help you in calculating your PIR rate.

You can log into your Christian KiwiSaver Scheme account and check your PIR. If you need to change your PIR then send us an email. If you’re not sure then you can phone us on 0508 738 473.

Investment returns to 31 December 2019

Investment returns to 31 December 2019

The great run continued into the last quarter of 2019. The return from shares was particularly good and led to solid Growth and Balanced Fund returns (given their preference toward shares). The quarter’s returns benefitted from the reduced concerns around trade discussions between the US and China, supported by earlier reductions in interest rates and a growing view that international growth may improve.

It should be remembered that the great returns ‘last year’ are flattered somewhat given the terrible last quarter of 2018 i.e. returns in the last year benefitted from the rebound / recovery from that quarter.

Shares prices continue to rise and interest rates remain at low levels. Your funds continue to participate in these performing markets. The funds remain diversified, emphasize quality, are cautiously invested and focussed on longer term returns.

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

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.)
Growth Fund 3.0% 20.7% 11.7% 10.7%
Balanced Fund 2.1% 15.1% 8.9% 8.4%
Income Fund 0.6% 5.6% 4.1% 4.3%