'You've lost my savings': KiwiSaver members struggle with downturn

Monday, 5 November 2018

There are still lots of gaps in our understanding of KiwiSaver. First published in 2018.

'I've lost $200 from my KiwiSaver balance,' one wrote. 'And I'm in a conservative fund.'

'You have lost $2670 of my savings in the last 12 months and my wife's KiwiSaver went down by a whopping $4200.'

ASB head of KiwiSaver Aidan Vince said the bank had had 'handfuls' of customers querying the drop. 'You do get these messages, what's happened and where's my money gone? I understand if you're seeing that it's not very nice.'

But it's all part of investing - and here's why you shouldn't worry.

* Here's why you should ignore this KiwiSaver report

* You're paying up to $40,000 for KiwiSaver: What do you get?**

No one is taking money from your KiwiSaver account.

This is what the market does

Markets move up and down. 'We expect these things to happen, we just don't know when,' Vince said.

Sometimes it's a correction - when share prices drop 10 per cent or more.

Other times it's a real downturn - when the market shifts and that downturn and associated pessimism takes hold to drive prices down further.

Most people will live through a handful of serious market events in their lifetimes.

This time, share markets have had such a long run of stellar returns that some investors have never experienced a serious downturn. Even the smallest jitter makes big headlines.

But it's all still part of what's normal.

This is how you make money

When markets drop, it means share prices have fallen. With KiwiSaver, most people are putting in the same amount each pay day - so they end up buying more shares (or whatever other asset your fund is investing in) during the downturn. Once the market recovers, those units are worth more - and your balance recovers more quickly.

You're in it for the long term

KiwiSaver is designed to be a long-term investment. Most people won't need to access the money for a decade or more. That means you have ample time for your balance to recover. It's unnecessary to check your balance daily, or even monthly. If you're satisfied your settings are right, you can leave it alone.

Vince said he could understand people buying a house in the next couple of months might worry about their deposit disappearing. 'That's why choice of fund is important. It's part of the education of being exposed to an investment like KiwiSaver…. it's not a bank account, it's not sitting in a term deposit. That's a good thing but it does mean you get periods of what's called volatility.'

Check your risk profile

But if the downturn has made you nervous, it's worth checking whether you have your risk profile right. This indicates how much risk you can tolerate.

If you need the money soon, you probably should be in a conservative fund. If it's a longer-term goal you're saving for, you can afford to take more risk in a growth option.

If you're not sure what's right for you, talk to your provider. They should be able to provide personalised advice to ensure your fund fits your situation. You can also use online tools such as those offered by Sorted.