Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


Constantly checking your KiwiSaver balance could cost you

Constantly checking your KiwiSaver balance could cost you $600,000: Mary Holm

By Nikki Mandow

May 17 (BusinessDesk) - Banks’ tendency to put their customers’ KiwiSaver balance on their online statements could be bad news for investors in the long term, according to financial author and KiwiSaver expert Mary Holm.

She warns that savers used to regularly watching their KiwiSaver accounts track gradually upwards during good times might panic and move to a worse-performing fund when the market turns down - as it inevitably will.

For someone in their 20s or 30s who decided to move from a higher-risk fund to a lower-risk one, this could mean losing out on hundreds of thousands of dollars in retirement, Holm told BusinessDesk.

“With most bank KiwiSaver funds you can see your balance when you log into online banking. A lot of people think that’s a good thing, because they say they like to see how their KiwiSaver is growing.

“That’s a real worry because once the market starts to get volatile, people could be watching their KiwiSaver account going down, maybe on a daily basis. And then they are more likely to switch to lower risk fund. That could be bad news.”

An example in Holm’s upcoming book takes someone whose total monthly KiwiSaver contributions are $400, increasing by 2 percent a year. If they invest in a conservative fund, Holms estimates after 40 years they could end up with a $400,000 nest egg. But in a higher-risk fund that sum would be around $1 million - a massive $600,000 difference.

Holm worries that people who are spooked by a downturn and pull their money out of a higher-risk fund could end up with far less retirement savings than if they had simply put their money into KiwiSaver and left it alone.

“If you are in a higher risk fund you have to stick with it through the ups and downs. We don’t know when there will be a downturn, but we know there will be one,” Holm said.

Warren Buffett, possibly the world’s most successful investor, once joked that his holding period for a stock is “forever”.

Anecdotal evidence suggests that for KiwiSaver customers (or potential customers), the ability to see their balance every time they go to their online banking page is a selling point for bank funds. This means banks are unlikely to remove the balances.

“But I would rather they did,” Holm says. “In an ideal world, people would be well enough informed to understand their balance will go down sometimes and that they shouldn’t react by moving to a lower risk fund. But realistically it’s going to be a long time before all New Zealanders understand that.

“In the meantime I’d love the banks to take on responsibility to get the message to their KiwiSaver members that it’s not a good idea to watch your balance too closely.”


© Scoop Media

Business Headlines | Sci-Tech Headlines


Greenpeace: Govt Extends OMV Exploration Permit

The Government has just granted oil giant OMV a two-year extension to drill in the Great South Basin, despite issuing a ban on new oil and gas exploration permits in April. More>>


Collective Bargaining For Contractors: Working Group's Model For Screen Sector

A recommended model to allow collective bargaining for contractors in the screen sector has today been unveiled by the Government-convened Film Industry Working Group. More>>


Kauri Dieback: DOC Closing Tracks To Protect Trees

The Department of Conservation will close 21 tracks across kauri land to help prevent the spread of kauri dieback. An additional 10 tracks will also be partially closed and the open sections upgraded... More>>

Price Of Cheese: Dairy Product Prices Descend

Dairy product prices fell at the Global Dairy Trade auction as whole milk powder slid amid the prospect of increased supply. More>>


Deductible Horses: Peters' Bloodstock Investment Plan

“Cabinet has approved the final design of the bloodstock rules which were first signalled in Budget 2018. Investors new to bloodstock breeding will be able to claim tax deductions for the cost of horses, even if they don't own an existing horse breeding business...” More>>

Petrol Up 19%: Annual Inflation To September 1.9 Percent

The consumers price index (CPI) increased 1.9 percent in the September 2018 year, driven by higher petrol prices, Stats NZ said today. This follows a 1.5 percent annual inflation rate for the June 2018 year. More>>