As New Zealand endures the COVID-19 pandemic, Kiwis are thinking about the best way to get through this unsettling time - and how to plan for the future.
Smartly investing money is a great way to prepare for any crisis or time of hardship such as the one we're facing now, and KiwiSaver is one of the very best ways a New Zealander can prepare for the future.
Milford Asset Management, which won Consumer NZ's People's Choice Award for KiwiSaver in 2018 and 2019, says any time is a great time to start a KiwiSaver account and now is no different.
And if you already have one, now's the perfect time to have a look and make sure you're with the best provider possible.
"One of the benefits of being in lockdown is people have time to think and reflect. It might give you enough time to do some research around which KiwiSaver provider is best suited for you," Milford's Head of KiwiSaver Murray Harris told Newshub.
"You could also argue that now's a good time to start KiwiSaver because markets have fallen and you're buying in at a lower starting point."
It's easy to compare KiwiSaver providers and make an informed decision on which one will be best for you.
And while you might have seen balances drop over the last few months, it's important to know that KiwiSaver accounts are tightly regulated by the Government.
What COVID-19 means for KiwiSaver
"People have questions about the impact of COVID-19 on financial markets and therefore their KiwiSaver accounts. They've been seeing their balances drop, particularly in March and this is probably the first time where such a sudden and sharp drop has been seen for many KiwiSaver balances," says Harris.
"Thinking back to the Global Financial Crisis (GFC) of 2007 - 2009, KiwiSaver was very new and balances were relatively small, so the dollar drop was small. Now people have much larger balances so the dollar impact has been more significant. That can be worrying.
"The key message is to think of KiwiSaver as playing the long game. Markets move up and down and they can move rapidly. Prior to March, we'd essentially had 11 years - since March 2009 - of financial markets going up. There were a few small sell offs but essentially they went up, so people saw their KiwiSaver balances go up every year.
"But it's normal for markets to react to things like COVID-19 and it's important not to panic and to remember it's about building up a nest egg to help fund your retirement."
So, what should people look for when comparing KiwiSaver providers? Here are the key things to consider.
Investment Returns
Every KiwiSaver provider manages funds differently and that means their investment performance can vary significantly.
There are a range of easy to find online tools to help someone see the track record of each provider and what returns they have delivered.
"Even a 1 percent better return over a long period of time can make a significant difference to your balance at age 65, with the power of compounding returns over what is generally a very long-term investment," says Harris.
"It can be in the tens of thousands of dollars or more, depending on how much time you've got and the type of fund you're in. So it's super important to choose a provider with a good, long-term track record of delivering strong returns."
Providers publish their returns on their own websites, but for more independent research Morningstar produces a KiwiSaver Survey every quarter that allows you to easily compare providers.
Value for Money
The raw data on returns each KiwiSaver provider has delivered is not enough alone to assess which is best. What they charge customers in the form of fees and the extra services they offer are also important to know.
"Like anything you pay for, you can pay more or less but it comes back to value for money. So it's not just about investment returns, it's about what other services a provider will give you, the access to experts to speak to particularly in times of market volatility," says Harris.
"Whether it's COVID-19 or the next crisis that comes along, an active manager can position your money away from at-risk companies and toward companies that are likely to benefit. Milford has a very good, long track record of strong performance in delivering for our members after fees."
Shared Success
Milford is just as protective of your money as they are of their own.
"I have my own money invested with Milford and I'm very happy to have it there," says Harris.
"Whether it's a portfolio manager or a member of any of our teams, we all have our own money in the same funds as our clients because we want to have absolute alignment with our clients. So we're experiencing the same as you - when markets go down, we see our own balances drop and know how unsettling that can be.
"Think of the pilot flying a passenger plane you're travelling on. They're highly motivated to get that plane safely on the ground, because they're in the same plane as you. We think of it as the same, our team is highly motivated to have your funds do the best that they can because we're on the same journey."
Transparency
A KiwiSaver provider should regularly communicate with its customers, so they know exactly how their funds are performing and can rest assured they're being invested in companies that align with their values.
"Transparency is important because it's your money - the funds belong to you, so you should fully understand where your money is invested, why it's invested there and most importantly how it's doing," says Harris.
"Milford communicates with our members every month, with commentary, and more often in times of uncertainty like March. It's particularly important at a time like this, when people want to know, for example, if their investments are exposed to the problems facing tourism or airline industries that have been severely impacted.
"With an active manager like Milford, we can ensure people's money isn't exposed to those industries and give them peace of mind by telling them that in our regular communications with them. As an active manager we can position away from those companies impacted severely by COVID-19 and toward companies that have actually benefitted from the pandemic like healthcare and overseas technology companies like Microsoft and Google."
Tools and Advice
The best KiwiSaver providers also give their customers access to financial experts who can offer advice and coaching for how to get the most money from the scheme and ensure they are well prepared for retirement.
"We've got a retirement planning tool where you can go and put in information about your personal situation and it'll map out what your KiwiSaver is going to look like up to age 65 and what your balance is likely to look like," says Harris.
"Right now, it's a tough time and some people are facing financial hardship due to the pandemic, so they may want to look at what a reduction in their KiwiSaver contributions now will mean for them when they turn 65. It could mean an impact of tens of thousands of dollars or more, so it's really important to consider that.
"As well as online tools, you can call our investor services team or speak to one of our KiwiSaver Advisers about what impact a change in your contributions will mean. In the long term, stopping or reducing your KiwiSaver contributions now could mean a much greater loss to you than taking another savings measure, and we can explain why and offer guidance around that."
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Please note past performance is not a guarantee of future performance.
This article is created for Milford Asset Management.
