Shaping tomorrow, today
KiwiSaver, the voluntary workplace savings scheme set up by the government to help New Zealanders to save for their retirement, has been helping literally millions of Kiwis prepare for their financial future since its inception in 2007.
But a new report says there is more people can do to enhance their future by lifting the amount they save and investing more in growth funds.
From a standing start in 2007, by June 2023 a total of 3.3 million Kiwis had joined the scheme and Morningstar's latest survey says total KiwiSaver assets have reached $96 billion.
And while KiwiSaver members could reportedly be doing more, last year alone more than 30,000 people used their KiwiSaver funds to help them buy their first home.
For members over 65, the savings they have accumulated in the 16 years since Sir Michael Cullen launched the scheme are likely to provide them with greater choices in the years ahead.
However, not all KiwiSaver funds are created equal
Choosing the right fund with the right degree of risk can be a daunting task – there are around 30 KiwiSaver providers and 350 different funds to choose from.
In the current volatile global environment, it’s hugely important your KiwiSaver fund is right for your age, your stage of life, and your future aspirations.
"What you do now will affect your ability to make your dreams happen"
The Beginnings
When then Finance Minister, Sir Michael Cullen, was in the throes of launching the KiwiSaver scheme in 2007, he described it as “the landmark workplace saving scheme.”
Five weeks after the launch nearly 92,000 Kiwis had enrolled, which the Minister said were “…very encouraging signs for a scheme which aims to make it much easier for many New Zealanders to build a nest egg for retirement.”
At that time forecasts expected around 50% of the workforce would be active members of KiwiSaver after 10 years.
However, the scheme has been more broadly embraced than was expected. By March 31, 2008, it had 716,000 members and six years later 2,297,840 workers had signed up. And it continues to resonate, with members topping 3.3 million by June last year.
Where we’re at now - making KiwiSaver work for your needs
KiwiSaver members are also realising it’s essential to take stock of their account regularly and to ensure they are making the right decisions about a financial investment that could change their future.
KiwiSaver schemes offer different types of funds – including conservative, balanced, and growth. With growth funds, the largest portion of an investor’s money is invested in growth assets like shares. Although these tend to see more growth over time, they can require investors to live with more ups and downs.
We're one of the most reliant countries in the OECD on Government pension. Even with NZ Super, close to 1 in 3 people don’t think they will have enough for retirement unless they continue working past 65. KiwiSaver is a great buffer, so getting it right can make a huge difference not just to when you retire but also how you retire.
Westpac’s Head of Product Investments, Lucy Frater, says that when someone joins KiwiSaver there are a few key things to do to set yourself up for success.
Firstly, you need to ensure you are in the right fund for your life stage and financial goals. It’s important to understand that KiwiSaver is not a savings account, Lucy says.
“That’s difficult when you’re young, but it’s a good thing to think about your retirement – do you want to be able to afford a meal out occasionally, or are you planning on travelling the world? What you do now will affect your ability to make these dreams happen.”
Secondly, you also need to ensure that you are making the right level of contributions to achieve your goals. With the power of compound investment returns, plus contributions from yourself, your employer and (if eligible) the Government, even small amounts now can make a big difference later.
Lastly, it’s important to maximise your employer and government contributions. Kiwis also have the opportunity to contribute more than just the minimum 3% of their salary. The key here is that the earlier you start investing for your retirement, the more you’ll have when you turn 65.
While Kiwis are notorious for having a ‘she’ll be right’ attitude to retirement, Lucy says it’s important when you start out to visualise how you’d like that stage of your life to be.
“It’s an investment and it will move up and down with the share market so people also need to think about how they might feel about seeing their balance go up and down.” This can be unsettling but there’s no need to make changes if you’re in the right fund for your long-term goals.
The future - to retirement and beyond
While the growth of KiwiSaver has been remarkable, Kiwis have also had to contend with market ups and downs.
The COVID-19 pandemic, inflation, the Ukraine conflict, and the downturn in US markets are all impacting global financial markets, and many KiwiSaver members will be seeing their balances rise and fall.
An article in 2022 noted that savers were holding their nerve, and there was a relatively low level of switching between funds, indicating savers had learned to stay focused on their long term strategy, despite short-term market volatility.
Lucy explains there’s now a generation who have grown up with KiwiSaver, who view it, or have used it, as quite literally as a key to getting their first home.
“There is a real sense of ownership - KiwiSaver has become synonymous with retirement. And we see it becoming an increasingly important tool for Kiwis to reach their financial goals.”
The importance of members knowing that their KiwiSaver investment isn’t doing harm is also becoming a consideration for many.
Westpac recognises the immense responsibility to drive sustainable value for their customers, people, communities and environment.
“All our Westpac KiwiSaver Scheme funds, except the Cash Fund, are RIAA certified, which means if we fall short of the sustainable investment commitments we’ve made, RIAA will publicly report on those shortfalls.”
The main area of focus is climate change “and we are actively looking for, and investing in, companies that are doing the right thing for the planet.”
For people approaching 65, Lucy says about a year out from that date, once again check you have a plan in place and that you’re in the right fund.
Lucy adds that once you reach 65 KiwiSaver becomes flexible so you can either:
- Access all, or some, of your money.
- Keep it invested and make, say, a monthly withdrawal.
- Keep contributing if you continue to work - you should also check with your employer as they may keep contributing their 3%.
“Having an idea of what you want your retirement to be like, is key. We’re here to help you put a plan in place and help you achieve it,” she says.
KiwiSaver is a powerful tool to help you secure your financial future.
Understanding KiwiSaver can help you make informed decisions about your savings to ensure you are able to live your best tomorrow.
Digital tools can help you with planning, or speaking to a financial adviser can be useful.
For a comprehensive guide to using KiwiSaver for your first home or life after 65, visit the full Your Tomorrow article and video series here.
BT Funds Management (NZ) Limited ("BTNZ") is the provider and issuer, and Westpac New Zealand Limited is a distributor, of the Westpac KiwiSaver Scheme ("Scheme").
You can get a copy of any applicable Product Disclosure Statement for the Scheme from any Westpac branch in New Zealand, or at www.westpac.co.nz
Westpac accepts no responsibility for the availability or content of any third-party websites and makes no representation as to the accuracy or currency of the materials.
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