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Investment Outlook for 2023

by | 7 Feb, 2023 | Investment, KiwiSaver, Uncategorized

The same main themes that applied in 2022 will again dominate in 2023. Those key themes revolve around the outlook for inflation, interest rates and growth. These are common every year but are particularly of concern at present.

Central banks have reversed their growth-enhancing policies. Interest rates rose significantly in 2022 and negatively impacted share prices. We believe interest rates will have a significant bearing on future returns. Will interest rates rise further this year? It is widely acknowledged that earlier interest rate rises have a delayed impact on the economy. Exactly how long the delay is and how deep the impact is varies depending on the area of the economy, e.g. mortgages, borrowing, business investment, consumer spending etc. There is still a lot of uncertainty about how labour shortages will affect the outcome. The fear is that labour shortages will result in wage growth, leading to higher inflation. These and other factors should determine how fast inflation numbers come down. Any geo-political developments could also surprise.

The World Bank has revised its 2023 economic forecasts. It was, in January 2023, expecting global economic growth of just 1.7% this year. If its predictions are accurate, that will put economic growth in 2023 at its third lowest level in the past three decades, behind 2009 (Global Financial Crisis) and 2020 (COVID-19).

There is little doubt, though, that whatever eventuates, the markets could fluctuate wildly at times. Rest assured, as we have mentioned previously, we are doing our best in these times of heightened uncertainty to look after our members’ interests. The portfolios remain diverse, and we focus on investments that we believe are more at the quality end of the spectrum.

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Your KiwiSaver checkup

by | 7 Feb, 2023 | General, KiwiSaver, Uncategorized

Just like getting a Warrant of Fitness for your car, we think it is essential to regularly check your KiwiSaver Scheme to ensure it is still set up the way you expect. So, we’ve put together a few tips to help ensure sure your KiwiSaver is the best it can be.

We suggest it be done annually, perhaps at the beginning of each year or when you receive your annual member statement.

 

1. Check if your investment profile is still right for you.

This is about where your funds are invested. Is your choice of investment funds too conservative, too aggressive or just right?

The Sorted website has a useful tool to help you called Investor Kickstarter at www.sorted.org.nz/tools/investor-kickstarter. You answer a few questions, and it provides a guide to what type of investor you are and a typical investment mix for your investment profile.

 

2. Are you contributing enough?

Depending on your situation, consider whether you can afford to increase your contribution rate or make extra voluntary contributions.

If you have suspended making contributions, is it time to recommence contributing?

The Sorted website has another useful tool to help you with these questions, the KiwiSaver Savings Calculator www.sorted.org.nz/tools/kiwisaver-savings-calculator. You will need to complete a few questions, which will estimate how big your balance could be at age 65 and how much you could get per week in retirement. Try different contribution rates to see the impact on your future savings.

 

3. Is your Personal Investor Rate (PIR) correct?

Your PIR is the tax rate we use to calculate the tax on the income from the investment of your contributions. Check you are using the correct PIR. You don’t want to have too much tax taken from your KiwiSaver earnings or too little and face a tax bill by having the wrong PIR rate. Your PIR for the current tax year is based on your total taxable income in either of the last 2 tax years. If that changes, so might your PIR. Inland Revenue can also instruct us to change your PIR if they assess that it is incorrect. We have a handy guide to help you calculate your PIR on the scheme’s website www.christiankiwisaver.nz/documents under the Guides & Policies section.

 

There it is! Checking these three items every so often will help make sure that your KiwiSaver account is working for you.

Our staff are happy to help you with any questions you have on this.

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AML requirements update

by | 7 Feb, 2023 | General, KiwiSaver, Membership, Uncategorized

We continue updating our customer records for Anti Money Laundering (AML) purposes

We want to say a big thank you to those customers who we have contacted and who have returned their completed consent form for electronic identity verification purposes, so that we can update your details for our compliance with anti-money laundering requirements. If we haven’t contacted you then you don’t need to do anything, your information is up-to-date!

 

We now have more than 70% of the consents that we need so that we can check whether or not you are a politically exposed person. This is a great result, and we are on track with updating our customer records. Paul has joined our member services team and the team will continue to follow up with those customers who we need consents from. Alternatively, if you haven’t already, you can provide your consent to electronic identity verification in any of the following ways:

  • through the Christian KiwiSaver Scheme website – this form of consent is online, so it is still a quick and simple way to complete the consent form. You can go direct to the website, or click the link to that form here: https://christiankiwisaver.nz/AMLConsent/
  • through your member portal – you can login to your account and find the link to the consent form on your dashboard. You can login here: https://christiankiwisaver.nz/login/ (if you need help logging in please email or call us)
  • by signing and dating a hard copy consent form – we can either email or post you a consent form (and you can post it or scan it back to us). Please email us or call us if you would prefer to provide your consent this way. 

 

One final request from us is that if you have moved address or changed your phone number or email address, could you please let us know? If so, our friendly member services staff can update your records for you.

Thank you for your assistance with this – we have greatly appreciated the understanding and positive response to date.

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Investment Returns at 30 September 2022

by | 10 Nov, 2022 | Investment, KiwiSaver

Investment returns (before tax and fees) for the quarter ending 30 September 2022 are:

Fund 3 months 1 Year (p.a.) 3 years (p.a.) 5 years (p.a.) 10 years (p.a.)
Growth Fund 0.7% -2.4% 6.0% 7.7% 8.2%
Balanced Fund -0.0%* -3.5% 3.7% 5.5% 6.6%
Income Fund -1.1% -5.4% -0.5% 1.1% 2.5%

* rounded to one decimal place.

 

Share markets were generally flat over the quarter. The fall in international share markets was offset by a fall in the New Zealand dollar. The New Zealand dollar fell as investors became concerned about the local growth outlook and that interest rates on offer may be better later overseas.

The downward movement in the New Zealand dollar could be considered a double edged sword. Exporters may be happier but imports may become dearer. Bond prices continued to fall (i.e. interest rates continued on their upward march this year) as major central banks around the world remained concerned with regards to the near-term inflationary outlook and conveyed their views as to the need for potentially higher short term interest rates. They hope to offset the rising cost of living that people are experiencing, by reducing demand for goods and services but without causing a recession or a large slowdown in the economy. The relentless rise in global interest rates continues to put downward pressure on share markets.

The recent return of large movements (up and down) in the share markets demonstrate their hyper-sensitivity to economic news and expectations. Political events added to the volatility (e.g. the proposed tax cuts and spending plans in the UK, subsequent U-turns in policy and the resignation of the UK Prime Minister).

The global economy is in unchartered territory with markets more focused on inflation and interest rates and less on company fundamentals. Outcomes in this respect are very hard to predict.

The International Monetary Fund (IMF) signalled a downgrade, for the fourth consecutive quarter, to its updated global growth forecasts in early October. The head of the IMF said that a third of the world’s economy would suffer a recession next year and many others would feel like they were in recession, against backdrop of shrinking real incomes and rising prices.

A lot of pessimism has been priced into markets this year, and there has been significant conjecture about where interest rates, inflation and the broader economy are heading.

Optimists point to leading indicators of inflation falling rapidly, setting up 2023 for a year of big declines in measured CPI (Consumer Price Index) inflation, while pessimists raise the idea that inflation will remain sticky, like it did in the 1970s, and it will take much higher interest rates to bring inflation under control.

Given the economic background which suggests a challenging time ahead for company earnings, uncertainty around company outlooks and consumer spending we remain cautiously invested, diversified and continue to hold higher than normal amounts in cash.

What is happening with KiwiSaver?

What is happening with KiwiSaver?

by | 10 Nov, 2022 | General, Investment, KiwiSaver, Uncategorized

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)

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Why are conservative funds losing money?

by | 10 Nov, 2022 | General, Investment, KiwiSaver

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.