POWERED BY MOMENTUM MEDIA
Kiwis get ‘more bang for their buck’ with move to balanced default funds
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.
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
Recommended for you
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
