A financial expert is urging Kiwis not to panic and hold on for the long run as the value of KiwiSaver funds fell by more than $2 billion in the last quarter.
The drop over the three months to September is being blamed on high oil prices, interest rates and international issues like the war in Gaza.
“It was a very tough quarter. Global markets have sold off significantly,” Financial Services Council chief executive Richard Klipin told Breakfast.
“When big geo-political events take place, markets respond, and markets have absolutely responded in the last quarter, so a lot of headwinds."
What it means for Kiwis is a reduced KiwiSaver balance – but it’s not as grim as many are thinking.
“There is no need to panic. This is a long-haul game here,” Klipin said.
He said that for a 30-year-old who still has 35 years until retirement, there are still going to be “a lot of shocks” in the future – urging people to wait out the storm.
“It’s to be expected,” he said.
For people who are about to retire, Klipin recommended they consult with advisers and “structure your portfolio well".
“Patient investors get well rewarded.
“Not all asset classes perform the same, and right now, you can go the bank and get a 6% term deposit, so if you structured your portfolio well, you’re probably going to weather the storm.”
New Zealand’s saving setup has been called “immature” in comparison to Australia’s setup, which sees mandatory payments of 11% or above.
It was found that Aussies are seeing 10 times the outcomes than what Kiwis get.
When asked if New Zealand needs to change KiwiSaver, Klipin said that it’s still a very young system compared to Australia, but the incoming government should be taking a look at what improvements could be made.
“It is time for fresh thinking. There is an opportunity with a new Government taking place.
“If you actually look at what the purpose of KiwiSaver is, we’ve got great examples across the ditch, but we’ve also got great examples across the world.
“So it’s about seeing what’s best of breed everywhere.”
Outgoing Prime Minister Chris Hipkins called KiwiSaver a “Kiwi treasure” and is open to looking at changes.
“We should always look at how we can continue to improve it.”
He said that overall, KiwiSaver has been “good for New Zealand”, but moving to a system like Australia’s, with high mandatory contributions, wouldn’t be good in a cost-of-living crisis.
“Right at the moment, while people are struggling with the cost of living, people increasing their KiwiSaver contribution isn’t necessarily going to ease any of that financial pressure.”
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