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Getting the Best Out of KiwiSaver

InvestNow takes a look at several ways KiwiSaver can be tailored to deliver the right results.

5 June 2024

Can I split my KiwiSaver?

You can “split” your KiwiSaver investment across multiple funds if the KiwiSaver scheme you’re invested in offers multiple investment options. For example, if available, you could “split” your investment across a growth fund and a balanced fund, or a balanced fund and a conservative fund.

But, as New Zealand legislation dictates, you can’t “split” your KiwiSaver balance across multiple KiwiSaver providers. And, as many providers only offer funds from a small handful of, or even just one, investment manager, this can leave investors with limited investment manager diversification.

As a business based on a firm desire to help people reach their investment goals, we found this significantly limiting from an investor perspective - as many financial experts will preach, diversification is a staple in any well-balanced investment strategy, including investment manager diversification.

We responded to this limitation by building a KiwiSaver scheme that offered Kiwis the ability to invest in 40-plus investment options, from 15 investment managers, like Milford, Smartshares, Fisher Funds, Foundation Series, and more.

Learn more about KiwiSaver investment manager diversification, or as we call it The Power of And, by going to InvestNow.co.nz/powerofand.

How do I go about establishing a KiwiSaver portfolio to best meet my needs?

Your approach to building your KiwiSaver portfolio shouldn’t be too different from your general investment approach outside of KiwiSaver – it should be based on your investment timeframe, appetite for risk, and investment goals.

The InvestNow investment principles listed below can provide a good overview of what we believe are key investment pillars of any investment strategy. While the InvestNow platform itself can enable you to put these pillars into practice by giving you the ability to actually invest.

  1. Invest now
  2. Understand the risks
  3. Asset allocation is (almost) everything
  4. Diversification is essential
  5. Individual risk tolerance matters
  6. Have a plan
  7. Stay informed, but don’t react to the noise
  8. Investment styles can be complementary
  9. Fees and tax are important (but not everything
  10. Investing is not a game

Although we want to empower you to take control of your own investment journey via our DIY platform, we acknowledge that making investment decisions can be challenging. If you need help, we strongly recommend engaging with a qualified financial adviser to consider your KiwiSaver requirements alongside your other financial goals and circumstances.

Go to investnow.co.nz/principles to learn about our 10 investment principles.

Interest rates are so good right now. Am I better to invest a lump sum into my KiwiSaver, or into a Term Deposit?

Firstly, it’s important to note that these are two fundamentally different investment products. There are a few things to consider in your decision-making.

  1. Returns: Term Deposits offer a fixed interest rate valid at the time you book the Term Deposit, whereas the return on your KiwiSaver investments is calculated retrospectively.
  2. Tax: Term Deposits are taxed at your resident withholding tax rate (RWT) up to 39 per cent p.a., while KiwiSaver is taxed at your prescribed investor rate (PIR) at a maximum of 28 per cent p.a.
  3. Fees: Term Deposits generally don’t have fees, while KiwiSaver and/or the underlying investment options do.

The above highlights the importance of making informed decisions and comparing options on a relevant and appropriate basis – comparing apples with apples.

The key message here is to do your homework, make sure you understand your investment options, and make informed decisions.

If you’d like a definitive answer to this question, we recommend speaking to a financial adviser to understand your full personal financial circumstances.

Should I be choosing my KiwiSaver provider on performance only, or are fees more important?

While performance and fees are important considerations when selecting a KiwiSaver provider, there are other factors, such as investment approach, customer service, range of choice, and your individual investment goals and risk appetite, that could be used in combination to make a more balanced decision.

A KiwiSaver provider’s reputation for delivering good returns for their investors is important, but past performance does not guarantee future performance, and therefore, past performance alone should not be used to select a KiwiSaver provider.

Likewise, fees alone are not the single best deciding factor in your KiwiSaver provider selection, as fees can correlate with other characteristics, such as investment style and asset allocation, which can significantly impact performance outcomes.

Investors should read the KiwiSaver provider’s product disclosure statement(s) for more information and, as always, seek professional investment advice if needed.

How often should I consider switching KiwiSaver scheme/provider?

This, once again, will be determined by your investment goals and whether your investment needs are being met (or not) by your current KiwiSaver provider.

It’s our observation that an individual’s investment goals and needs will change over their lifetime, so choosing a KiwiSaver provider that offers a wide range of choice and flexibility to make changes will remove the need to unnecessarily change KiwiSaver providers.

Another consideration here is the “out-of-market” cost of switching KiwiSaver schemes. Something you can read more about by going to investnow.co.nz/hiddencost.

Learn more about the InvestNow KiwiSaver Scheme and fund manager diversification a.k.a the Power of ‘And’ by going to https://investnow.co.nz/kiwisa....

The information and opinions in this publication are based on sources that InvestNow believes are reliable and accurate. InvestNow makes no representations or warranties of any kind as to the accuracy or completeness of the information contained in this publication and disclaim liability for any loss, damage, cost or expense that may arise from any reliance on the information or any opinions, conclusions or recommendations contained in it, whether that loss or damage is caused by any fault or negligence on the part of InvestNow, or otherwise, except for any statutory liability which cannot be excluded. All opinions reflect InvestNow’s judgment on the date of this publication and are subject to change without notice. This disclaimer extends to any entity that may distribute this publication. The information in this publication is not intended to be financial advice for the purposes of the Financial Markets Conduct Act 2013, as amended by the Financial Services Legislation Amendment Act 2019. In particular, in preparing this document, InvestNow did not take into account the investment objectives, financial situation and particular needs of any particular person. Professional investment advice from an appropriately qualified adviser should be taken before making any investment.

The issuer and manager of the InvestNow KiwiSaver Scheme is FundRock NZ Ltd. For product disclosure statements go to investnow.co.nz.

Informed Investor's content comes from sources that Informed Investor magazine considers accurate, but we do not guarantee its accuracy. Charts in Informed Investor are visually indicative, not exact. The content of Informed Investor is intended as general information only, and you use it at your own risk.

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