If you haven’t given your KiwiSaver much thought over the last year, it’s a good time to sit down, take stock, and make sure that you’re getting the most from it. A regular review each year could help you make sure you’re on track to achieve your goals, whether you’re saving for retirement, or to purchase your first home.
The Aon team have put together our top 5 tips to help you maximise your savings.
1. Are you in the right fund?
When selecting a KiwiSaver fund it’s important to consider your tolerance for risk, including your investment timeframe. If you’re close to retirement or wanting to withdraw your KiwiSaver money to help you purchase your first home, protecting the value of your KiwiSaver money could be most important to you. You could consider a more conservative fund, which will generally provide lower risk but also lower returns. Otherwise, if your money will be invested in KiwiSaver for a long time, you could consider a balanced or growth fund, where your returns may vary from year to year, but your KiwiSaver balance should grow more over the longer term.
Aon KiwiSaver Scheme has an online risk profile form to help you understand your attitude towards risk, to help you determine which of our funds might be right for you. If you’re still unsure, you may want to seek the advice of a financial advice provider.
2. Do you contribute enough to receive the full government contribution each year?
Did you know that the government could be topping up your KiwiSaver account by over $500 each year? For every $1 you contribute into your KiwiSaver account each year (up to $1,042.86), the government could contribute 50c? That works out to $521.43 each year that you could be missing out on. If you earn a salary of $35,000 or more and contributed at least 3% to your KiwiSaver from 1 July to 30 June, you should receive the maximum government contribution. For eligible KiwiSaver members, the government contributions can add up to a significant amount of money for your retirement, so make sure you don’t miss out!
3. Check on your KiwiSaver account – but not every day!
Aon KiwiSaver Scheme offers you the ability to view your account online. You’re able to see your up to date KiwiSaver balance and what you, your employer and the government have contributed over the year. We also encourage you to log in and make sure your contact details are up to date, so we can keep you informed about your KiwiSaver.
While it’s great to be able to see how your balance is growing, remember that KiwiSaver is usually a long term investment, and particularly if your money is invested in growth assets (such as shares or property), the value may go up and down, so it might not be a good idea to check your account every day. Which brings us to our next tip…
4. Keep calm when the share markets go crazy
Last year was a great example of the importance of keeping calm during share market turmoil. Some KiwiSaver balances dropped sharply during February and March 2020. KiwiSaver members who panicked and switched to a more conservative fund realised their losses and lost out when the share markets recovered strongly later in the year (assuming they stayed in the conservative fund).
Over the long-term, funds with a higher allocation to shares (like balanced and growth funds) should deliver higher returns, but with higher volatility than cash and conservative funds.
When the share markets go down, your fund still holds the same amount of shares, but the value of them has declined. If you switch funds when your balance has declined, you are realising that loss, and you may miss out when the value of the shares goes up again (which history indicates they should).
5. Look at your KiwiSaver scheme’s performance over the long term
Is your KiwiSaver scheme providing strong investment returns over the long term? As your money is likely to be invested in KiwiSaver for a long time, it’s important to look at long term performance. Returns over five or 10 years are likely to be a better indicator of how your KiwiSaver scheme is doing, instead of focusing on the last month’s investment returns.
Most of Aon KiwiSaver Scheme’s funds have provided higher than average returns over the 10 years to June 2021 in the conservative, moderate, balanced and growth categories of the quarterly Morningstar KiwiSaver Survey.
If you have any questions on KiwiSaver, there’s lots of information on our website, or you can
get in touch with our Aon KiwiSaver Scheme team – we’ll be happy to help you out.