There has been a lot of movement in the market recently which may be worrying KiwiSaver scheme members around the country.

While KiwiSaver is a long-term retirement investment, you will have seen that annual performance is down. So, what do you need to know about what is happening with KiwiSaver?

What do you need to know?

KiwiSaver is an investment. This means that you are an investor and through this retirement scheme, your money is invested into the market. We at Christian KiwiSaver Scheme carefully manage your money in the effort to grow your investment and to minimise losses.

Depending on your situation, you may also be receiving additional contributions from your employer and/or the Government which you generally would not be receiving outside of a KiwiSaver scheme.

Previously, KiwiSaver schemes have had periods of strong positive returns. In recent years, particularly since the COVID pandemic, the market has not performed so well. The thinking in the market is that it is normal to have this sort of rebalancing period, particularly with these types of unprecedented events.

Most KiwiSaver schemes are in the same boat. Schemes are carefully watching the market and are all subject to its performance. KiwiSaver schemes are also tightly regulated by the Financial Markets Authority who enforce rules for the protection of consumers.

What can you do?

• It is important to remember that KiwiSaver is a long-term investment. While KiwiSaver has experienced a turbulent time in this past year, you can see that our 5 years (p.a.) and 10 years (p.a.) investment returns are positive.
• Last quarter we published an article to help you navigate through this potentially confusing time. Our message is very much the same, i.e. that you look at your investment goals and remember why you chose your particular fund rather than making any sudden decisions. You can view that article here.

While the future is always uncertain, the recent performance of the market can be seen as part of the investment experience where we will experience general ups and downs.

Anglican Financial Care (AFC), the fund manager of Christian KiwiSaver Scheme, is an organisation with long-standing experience. Established in 1972, AFC is celebrating 50 years of serving its members this year. We look forward to continuing to serve your KiwiSaver needs.

“I have told you these things, so that in me you may have peace. In this world you will have trouble. But take heart! I have overcome the world.”

John 16:33 (NIV)

Some KiwiSaver investors who have their money in a conservative fund have been shocked by recent performance. Typically, these types of funds have been seen as “less risky”, but given their recent losses you too most likely want to know why these types of funds are losing money.

The performance of conservative funds are strongly linked with interest rates. If interest rates go up, as they have been recently, then the investments of the fund will generally go down in value (which leads to negative returns). However, if interest rates go down then the investments of the fund may go up in value (which leads to positive returns).

Why are interest rates going up?

Interest rates are increasing because our official cash rate (and many around the world) has been going up. The Reserve Bank of New Zealand (and other major central banks around the world) uses the official cash rate as a tool to set interest rates that try to fight inflation.

Their hope is that interest rate increases will lead to a slowdown in demand and therefore lower inflation. One example of this is that people may decide to spend less on products because of the higher interest rates. The idea is that there is a flow-on effect so that companies will begin to charge less for their products as they see people beginning to spend less.

The amount that we spend/purchase and the amount companies charge for their products are part of what affects whether interest rates go up or down. For instance, if demand does slow down enough then this might mean interest rates may not need to rise anymore.

Interest rates and inflation are not just influenced by what happens locally, but are also influenced by what happens around the world. In the recent past, we have had very low interest rates. Sudden big events, such as the war in Ukraine and COVID, may be part of the surprising inflation we are currently experiencing – and the big increase in interest rates we are experiencing now.

We at Christian KiwiSaver Scheme have certainly been doing our best to minimise these negative returns, however when the market has been performing this way it is sometimes difficult to do so.

Our investment style, with a focus on capital preservation and diversification, aims to reduce the losses that can prevail in these more uncertain periods.

We will be requesting some simple but important information from some of you in the next few weeks to help us fulfil our obligations under the Anti-Money Laundering legislation. This information will help us update your records to fulfil compliance requirements.

Meeting compliance obligations is of utmost importance for us here at Christian KiwiSaver Scheme so that your trust in us is unquestionable.

In the next few weeks, our Chief Executive will be sending some of our members emails (or, where we do not hold your email address, letters) asking you to provide us information to help us fulfil compliance requirements.

When you receive this communication, please complete the instructions. The whole process should be relatively easy and take less than a minute, but if you have any questions, including whether or not the email or letter you receive is legitimate, then please do not hesitate to contact us. If you do not hear from us, you do not need to do anything – your information is up-to-date.