'Information gap' harming KiwiSaver outcomes

KiwiSaver investors still lack the knowledge required to make good choices about the investments, ASB’s latest KiwiSaver survey shows.

Monday, February 26th 2018, 6:00AM

ASB senior wealth economist Chris Tennent-Brown said the latest KiwiSaver survey, for the February quarter, showed most were still extremely conservative in their investment preferences, which would could harm their long-term outcomes.

“It’s surprising that a high number of investors regard term deposits as the investment likely to provide the greatest return, with many saying they would like to see term deposits available as an investment choice within KiwiSaver.”

The February 2018 quarter ASB KiwiSaver Survey found 17% of respondents had never reviewed their fund choice, and 19% did not even know which fund their investment was in.

“We strongly encourage KiwiSavers to look at their timeframes and goals when choosing their investment fund. Unless an investor’s timeframe is very short, we expect some exposure to share markets will enhance their long-run returns,” Tennent-Brown said.

“A reasonable exposure to share markets within a KiwiSaver fund is appropriate for investors with a decade or more until retirement.

“In contrast the default conservative funds typically have a low exposure to share markets, and accordingly, are expected to have lower long-run returns.”

The survey found respondents did not understand how KiwiSaver worked, which created uncertainty, especially through periods of volatility.

“February’s volatility has highlighted the challenges for both investors and product providers,” Tennent-Brown said.

He said the wobbles needed to be seen in the context of long-term performance.

“The fluctuations in the NZX are consistent with dips we have seen over the past decade, but it’s important to factor in the large gains over the past year when considering the February declines. The lack of volatility and the staggering share market gains of more than 20% over 2017 are more unusual than the early February dip.”

He said there was an information gap between providers, investors and markets which affected KiwiSavers’ confidence when it comes to choosing which fund to invest in.

Tags: ASB KiwiSaver