Paul McBeth is the editor of The Bottom Line and Curious News, having worked at BusinessDesk for 15 years. His KiwiSaver has been with Milford Asset Management since 2014, when he finally switched from the Tower Asset Management default he’d been in for several years.
In case you weren’t paying attention, KiwiSaver has been getting more aggressive.
And not in the Wolf of Wall Street cold-call kind of way where products are getting pushed on unsuspecting clients, but rather the level-headed investor judging they’ll be in the market for longer than *insert cause of current slump here* kind of way.
With those 3.4 million KiwiSavers showing a greater understanding, and tolerance, of the ebbs and flows of market ups and downs, providers have played ball and are rolling out more products catering to growth assets rather than reliable income options.
Just last month Pathfinder launched a new high growth fund, with a tilt towards international stocks to chase those fatter returns overseas. And it wasn’t lost on us that our ethical friends chose not to adopt the aggressive moniker, as Pie Funds plans to when it finally launches its upcoming new fund.
This shouldn’t really be a surprise.
Financial literacy has been on the up for a number of years now and KiwiSaver itself has watched a cohort of youngsters go through school and any subsequent training and enter the workforce. For them, the idea of compounding growth and dollar-cost averaging has been with them since day dot.
Ain't nothing gonna break my stide
We saw the nation’s resurgent retail investor base take the Liberation Day volatility in their stride, with the Sharesies brigade continuing on with their very responsible regular long-term purchases through the dips, and the more cavalier day traders doing their best to do the unthinkable and beat the market – or at least nab a short-term bargain or two.
That’s not to say that knowledge alone won’t stop them from doing something stupid with their money. They are, after all, young and brash, full of vim and vigour and raring to try new things. It kind of comes with the territory.
But the 569,000 or so under 25-year-olds have a lifetime to not just recover from their mistakes, but also for any poor investment choices to bounce back. Such is the way of long-term investing.
But let’s not pat ourselves on the back just yet.
While Morningstar’s resident KiwiSaver guru Greg Bunkall notes the local tilt towards growth assets in recent years, we’re still streets behind our Aussie counterparts.
Sure, local growth assets have increased to 60% of KiwiSaver’s $121.2 billion under management at the end of March from 57% in 2021, but that’s a far cry from the 74% allocation you see across Australian super funds.
And our 2% rate of investment in unlisted growth assets pales in comparison to Australia’s 18%.
Yes, they’ve had an extra decade-and-a-half to get their big funds firing, but they also have 11% contribution rates, which will be going up to 12% soon.
That matters – as Sharesies’ Suse Batley pointed out on a recent Shared Lunch podcast, when it comes to long-term investing, it’s time in the market that remains a universal truth and when you’re putting in a regular amount, that makes a big difference when you come to call it in.
Gimme, gimme more
In fact, for Morningstar’s Bunkall, that’s more important than KiwiSaver’s government contribution potentially facing some means-testing.
With the average salary around $85,900 for full-time workers, the government’s $500 or so is about 0.6%, so useful, but not the stepchange needed to get more money working earlier for savers.
Admittedly, the remaining government subsidy is a far cry from what architect Michael Cullen had in mind when he conceived of the savings scheme, with a $1,000 kickstart, a $1,040 annual contribution from the government, a $40 annual fee subsidy and a tax credit for employers.
Given it was in its infancy when Cullen’s baton was passed on to Bill English, no surprises that the savings scheme was regularly raided by John Key’s administration to shore up the books through some tortuous times, spanning the wake of the global financial crisis and the Canterbury earthquakes.
The fact that it continued to draw people in with its soft compulsion of making them opt out of a scheme when they started a new job is testament to its success.
There aren’t too many other products out there with 3.4 million users.
And if the 2023 instalment of Massey University’s Up-style financial literacy study is anything to go by, we as a nation will need it.
The 2022 five-yearly update found the group of youngsters and youth adjacent see KiwiSaver as a key portion of their retirement, with more than two thirds of them doubting the universal pension will be enough for them to live on in their golden years. And almost 90% of them anticipate the age of eligibility will rise.
Finance minister Nicola Willis has been sending the smoke signals that something’s up for KiwiSavers – let’s just hope she doesn’t disappoint, because that’s a big chunk of the population who are getting into their stride when it comes to investments and tolerating risk.
Image from Attentie Attentie on Unsplash.
