Westpac NZ launch new high growth fund
Thousands of KiwiSaver members who moved to conservative funds during the COVID-19 pandemic are still missing out on potential gains, according to new data from Westpac NZ.
The findings coincide with the launch of Westpac’s KiwiSaver Scheme High Growth Fund, aimed at New Zealanders seeking higher long-term returns.
It comes a day after the FMA announced KiwiSaver has $100 billion under management.
The cost of being conservative
Between February 20 and March 31, 2020, Westpac processed 18,140 requests to shift to more conservative funds as global markets reacted to the pandemic.
While over a third of these switches were reversed within three months, 27% of members have yet to return to growth-focused investments.
Westpac’s analysis highlights the potential cost of staying conservative.
A typical KiwiSaver member earning the median wage, contributing 3% monthly, and switching their $25,000 balance from the Growth Fund to the Conservative Fund in March 2020 would now have about $50,919.
If they had stayed in the Growth Fund, their balance could have reached $60,726, before tax.
Based on assumed returns from the Westpac KiwiSaver Scheme Calculator - which it must be said is only general in nature and does not constitute advice about future financial performance - that gap would continue to widen over time.
For example, a customer who’d remained in the Growth Fund would have a $156,472 balance in 10 years’ time, compared to $120,880 for a customer who’d switched to the Conservative Fund on March 20, 2020.
Westpac NZ general manager of product, sustainability and marketing Sarah Hearn (pictured above) said long-term investors who are not in the right fund will likely short-change themselves at retirement.
“The COVID-19 experience and more recent market fluctuations should serve as a reminder to regularly think about your investment goals, whether you’re saving for retirement or a first home deposit. That includes checking you’re in the right type of fund for you and your stage in life,” Hearn said.
“Market volatility is normal and expected. Those of us who aren’t nearing retirement will see our balances affected by more economic peaks and troughs before we get there.”
Younger Kiwis hold on hope
For younger Kiwis, the good news is that there’s plenty of time to recoup any losses experienced throughout the pandemic.
Hearn urged New Zealanders that they can reach your retirement goals by making a plan and sticking to it.
“Taking five minutes to check out our Westpac KiwiSaver Scheme Fund Chooser and Calculator, or equivalent tools, will help ensure you’re in the right fund and setting yourself up for the future you want,” she said.
Strong demand for Westpac High Growth Fund
Hearn said the new Westpac High Growth Fund aims to provide the highest returns of all the Westpac KiwiSaver Scheme funds over the long term.
“However, it is also likely to experience the most short-term volatility, so is better suited to people who have at least 13 years before they want to use their KiwiSaver savings, and who are comfortable with greater movements in their balance, both up and down,” Hearn said.
Westpac NZ expect strong demand for this fund, as the bank’s average KiwiSaver member age is younger than the market average.
Therefore, the average Westpac NZ KiwiSaver customer has a longer time horizon for their investment.
“We encourage every KiwiSaver member, regardless of their age, to be engaged in their investments and to seek expert advice if they’re not sure they’re on the right track,” she said.
