Q. I will turn 65 in August and will be eligible to withdraw my KiwiSaver funds. I have been in a conservative fund since July 2007 and my balance is nearly $14,000. I was planning to take the money out and put it in the bank, but when I look at what the bank is offering I think my KiwiSaver might be doing better. Would it make sense to leave my KiwiSaver money where it is? Although I am no longer working I don’t need the money yet as I have other savings.
A. Your fund manager should provide you with information on your options before August. There are 16 KiwiSaver providers and when I got your question I contacted several providers to find out what they expect their eligible members will do.
Carmel Fisher of Fisher Funds Management told me: “Some members are choosing to continue contributing, some have employers who will also continue to contribute, some are consolidating their other investments into their KiwiSaver account for simplicity, and others are considering withdrawing some or all of their KiwiSaver balance to meet their living expenses.”
What about returns?
Conservative KiwiSaver funds averaged 5.3% per annum before tax over the four years to 31 March 2012 (refer Morningstar reports) – better than bank term deposits over the same period. Of course, past performance is no guarantee of future results. Although your KiwiSaver account is in a Conservative fund, it will still be exposed to some growth assets such as shares, so the returns will not be the same as a bank term deposit – they may be better or worse. Anyone who plans to make regular withdrawals from their KiwiSaver should check their asset allocation. If your exposure to shares is too high, the value of your units will go up and down like a Cook Strait ferry in a rough sea.
Read the reports that you get from the fund manager carefully so that you know where your money is invested, and the returns you can expect.
Steve Wiggins from Gareth Morgan Investments told me: “We have been personally contacting all of our customers who are coming up to being eligible to withdraw to ensure that they are fully aware of the options available to them and can make the right decision for their individual situation.’ He added: ‘We have recently introduced a new investment portfolio that provides an option where returns are even less volatile than our Conservative portfolio. This will be joined in September with a portfolio that will only hold cash...”
KiwiSaver is strictly regulated with lower fees than most managed funds. The level of disclosure is good and getting better. Anyone over 65 who withdraws their funds and closes their account will not be able to get back in.
Think carefully before taking this final step.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide specific or personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email shelley.hanna@peak.net.nz.
