Kiwis get ‘more bang for their buck’ with move to balanced default funds

3 March 2020
| By Laura Dew |
image
image
expand image

Default KiwiSaver funds will be moved from conservative to balanced funds in a shake-up of the New Zealand superannuation system.

The rules will apply from July, 2021 and were described by New Zealand’s finance minister Grant Robertson as giving people ‘more bang for their buck’.

Conservative funds were typically 10%-35% invested in growth assets whereas balanced funds were 35%-63% growth assets, making them more suitable for those with a longer-term time horizon.

Most of those people in a default fund were under-60 so they would have more time to recoup potential losses from being in a balanced fund over their working life.

Richard Klipin, chief executive of Financial Services Council of New Zealand, said: “The potential benefits for someone from being in a balanced fund rather than a conservative option over the duration of their working life are significant. 

“This simple decision could be lifechanging for many of us and ensure that more Kiwis are able to enjoy a greater degree of financial security in their retirement.”

However, Klipin urged the NZ Government to work on how to manage the process if an existing KiwiSaver default provider was not reappointed and they lost their default clients.

“This would likely involve transferring tens of thousands of KiwiSaver accounts at once and if not carefully managed could be a cumbersome process. It is vital that officials have modelled it carefully and planned accordingly,” he said.

“Trust and confidence in KiwiSaver are essential. We therefore welcome the changes in this announcement that help build stability and confidence in the scheme.  We urge though the Government to tread carefully on those that risk further politicisation of KiwiSaver and dragging it into the political arena.”

As well as the changes to default funds, fossil fuels, landmines and illegal weapons would also be banned from KiwiSaver funds.

The policy, which would be enacted from July 2021, would require ethical standards for default KiwiSaver funds to protect those who do not make a specific choice of fund when they sign up for the system.

The current terms of nine existing KiwiSaver providers would expire in June 2021 and the rules would apply to anyone wanting to default into the fund after that date.

 

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

11 months ago
Kevin Gorman

Super director remuneration ...

11 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

11 months 1 week ago

Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Co...

1 day 3 hours ago

Demand from institutional investors was the main driver of growth in Australia’s responsible investment (RI) market in 2023, as the industry continued to gain momentum....

1 day 3 hours ago

In a new review of the country’s largest fund, a research house says it’s well placed to deliver attractive returns despite challenges....

1 day 4 hours ago