10 Questions about your KiwiSaver and COVID-19

Jessica Satherley
10 Questions about your KiwiSaver and COVID-19
Executive Financial Adviser Lauchie Campbell discusses some common questions about your KiwiSaver.

In light of the COVID-19 pandemic that has affected global markets, REDnews spoke to Westpac Executive Financial Adviser Lauchie Campbell to discuss some common questions about your KiwiSaver. 


What does the market turmoil mean for my KiwiSaver? 

“In general, the value of your investment has declined, but unless you were to withdraw those funds or change over to a different fund, that loss has not been realised.    

“Historically, when these events happen, markets tend to recover.  Sometimes it takes days, months, or longer, but they do recover – stay calm, it’s about time, not timing.” 

Should I move my KiwiSaver to a conservative fund? 

“Investors can be tempted to do something when market turmoil happens, but the best move is usually no move at all.   

“If you faced a situation where the market rebounded quickly and you had changed funds, how would you feel if you could have recouped all your money (and potentially more) by riding out the turmoil. 

“The decision to change fund should be based on changes in your life, rather than the market.” 


How long will the market take to pick up again? 

“Unfortunately, we cannot predict that; however, we can look at similar past events. 

“Although this is more pronounced, the market response to SARS in 2003 and Zika in 2016 provide some insights into how markets respond, as does the Global Financial Crisis. 

“In all scenarios, investors who sold on falling prices missed out on significant rebounds that occurred; the rebounds were not immediate, but the most significant moves back up tend to happen quickly.   

“There’s no guarantee that this scenario will be the same in terms of the speed of the rebound, but at some point, it’s reasonable to expect the rebound.  

“It’s one of the many clichés in investment markets, but it is truly ‘time in the market, not timing in the market’.” 


Should I take this opportunity to add extra voluntary contributions to my KiwiSaver while the market is down? 

“It depends on your personal circumstances.  

“As above, I wouldn’t make changes based on market changes, but instead look to make them based on changes in your life. 

“For some people it might make sense, if they were thinking about it anyway. 

“For example, getting closer to being able to access their KiwiSaver in retirement, mortgage free and now looking to get any extra savings ability working harder for them. 

“The key is to consider the original purpose of your KiwiSaver and how you’re using it to work towards your original investment objective – be it first home or retirement – and the limited scenarios in which you can withdraw from KiwiSaver. 

“Therefore, don’t contribute more than you can afford to have locked away.” 


What would be the right reason to change funds? 

“For KiwiSaver members, the changes in your life that might lead you to change funds are things like a reduced or increased investment timeframe.  For example, your goal is to buy a house within the next three years - you may need your money quite soon, or, after buying your first house - you now have until you are 65 before you’ll access your money again. 

“As your circumstances change, you should consider how that changes your investment timeframe and the objective of any investment.” 


If I’m invested in a growth fund as the market drops, why should I stay in it? 

“This comes back to your individual purpose. Generally, it pays to select a strategy appropriate to your investment timeframe and stick to it, as reacting to short term volatility may mean missing out an any market recovery that might follow. 

“However, if your circumstances have changed or if you are really not comfortable with the movement in your investments, this might be a sign you’re in the wrong fund. 

“If you’re invested in a growth fund, you’re exposed to the opportunity of higher returns over time. 

“But you need to be prepared for a volatile journey and you need to have time to ride out the bumps.”  


For investors in a conservative fund, is this a good time to change to a growth fund? 

“Knowing when to get back in, is just as hard as knowing when to get back out. 

“Rather than try to time the change, ask yourself ‘what’s changed for me?' 

“For example, many members may have withdrawn for a first home purchase and they might have been invested in a conservative fund for that purpose. 

“Have you revisited that approach and considered changing your fund to focus on the revised purpose of your KiwiSaver account, for example retirement. 

"Depending on your age, you might not be looking at accessing your KiwiSaver again for another 30 years. 

“This is an investment timeframe that allows for the ups and downs that you can expect with a growth fund for the benefit of higher expected returns. 

“It’s all about the long-term plan for your account and how it fits into your plans, be it first home withdrawal or retirement. 


What is your advice to people who are worried about their KiwiSaver?  

“Don’t panic and don’t check your KiwiSaver balance every day. 

“That’s easier said than done, but in an age where things are more transparent than they used to be, checking it every day creates growing anxiety and poor investor outcomes in some scenarios.  

“Think of it this way, no one is giving you the value of your home every day – it’s typically for the long-term and generally you aren’t actively seeking an up to date valuation.  

“The same goes for your KiwiSaver account - think about the purpose, your circumstances, the opportunity for long-term growth, not short-term changes in in value.” 


What if I experience financial hardship during this downturn? 

“There are a range of options for people in hardship including the Government’s wage subsidy schemewider package for businessestax relief and Westpac’s coronavirus assistance offering

“A Kiwisaver hardship withdrawal is a last resort but if there is the potential that you will need to rely on a hardship withdrawal (subject to eligibility) from your KiwiSaver account then you may want to consider your level of contributions to KiwiSaver as a first step.  

“If you are eligible for a hardship withdrawal and are likely to need a larger amount, you may want to consider moving to a fund that has less volatility. 

“This would create more certainty around the value of your KiwiSaver account and the amount you have available if you need it.”  


When events like this happen in the market, what do the people managing KiwiSaver do? 

“We are an Active manager, so the fund managers are always looking at market opportunities, but generally it’s about maintaining a disciplined approach to investing. 

"The market moves meant the portfolios had slightly more income assets (bonds and cash) compared to growth assets (like shares) than they normally would. 

“This allowed the investment team to use some cash to purchase growth assets that had fallen as a result of the falling share market. 

“More generally, the fund managers are also closely monitoring how they manage the risk within the funds. 

“For example, exposure to tourism or retail sectors, and looking for investment opportunities that are more defensive in sectors like consumer staples, like Nestle or Proctor and Gamble.” 


The information in this article is general in nature and is not personalised financial advice. Lauchie’s disclosure statement under the Financial Advisers Act is available free of charge on request from Westpac.

Related links:

Tax relief for businesses as Coronavirus COVID-19 hits profits

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