The Financial Markets Authority (FMA) - Te Mana Tātai Hokohoko - is urging young New Zealanders to check they're in the right KiwiSaver fund. The call follows data indicating over 12,000 KiwiSaver members aged 26-35 years old are sitting in lower risk or conservative funds after switching from higher growth funds during COVID-19 market volatility last year.
Data supplied to the FMA by 11 KiwiSaver providers shows around 12,700 younger KiwiSaver members switched from growth to conservative funds between February and April last year and, most of them are still sitting in conservative funds, which may not be aligned with their long-term savings goals.
Gillian Boyes, FMA Manager - Investor Capability, is calling for young New Zealanders to take notice of their annual KiwiSaver statement and check if they're in the fund that suits their needs.
"Generally speaking, you should be in a high growth fund the younger you are and the further you are from retirement. Growth funds provide the greatest opportunity to maximise returns and although the balance might jump around, young people have plenty of time until retirement age to recover any losses," she said.
"The exception is if you are planning to make a first-home withdrawal within the next one to three years and may want to choose a conservative fund so you have more certainty around your balance."
Ms Boyes said the number of young people who switched last year and are still in conservative funds is likely larger than 12,000 because the FMA data represents around three-quarters of the KiwiSaver market. The FMA will soon release the full dataset in a report focused on KiwiSaver fund switching during the pandemic.
What investors can do
Each year, the FMA runs a campaign encouraging KiwiSaver members to "take a looksee" at their annual statement, which arrives between April and June via post or email. The document contains important information about a person's KiwiSaver account, including the type of fund they're in, how much they're projected to have by age 65, and what that lump sum means as a weekly payment spread out over 25 years.
This year the FMA is providing members with information and resources on why fund choice is so important, what fund might be right for someone, how to change funds, and getting financial advice.
Members should ask themselves these questions:
- Am I in the right KiwiSaver fund?
- Can I afford to contribute more?
- Am I getting good value from my KiwiSaver provider - do their fees seem reasonable?
- Am I happy with the amount of money I'll have in my KiwiSaver at 65?
The FMA campaign includes:
- A social media campaign, including short case study videos featuring 24-year-old "Shannon" and 33-year-old "Lucas", reminding people to check they're in the right fund.
- An Instagram Live Q&A session hosted by ZM presenter and social media influencer Cam Mansel to answer young people's questions about KiwiSaver, featuring FMA's Gillian Boyes, on Wednesday 26 May at 6.00pm (FMA Instagram).
- Bus shelter advertisements around University of Auckland and AUT featuring a QR code to the Looksee campaign page.
