Pandemic Fund Switchers Missing Out On KiwiSaver Gains, As Westpac Launches High Growth Fund

Thousands of KiwiSaver members who switched to a more conservative fund during the COVID-19 pandemic are still missing out on potential higher returns, according to Westpac NZ data.

The research comes as the bank launches its Westpac KiwiSaver Scheme High Growth Fund, for New Zealanders looking to maximise returns over a long time horizon.

Between 20 February and 31 March 2020, Westpac processed 18,140 requests to switch into more conservative funds as uncertainty around the pandemic caused turmoil in international markets. While more than a third of those switches were reversed within three months, 27% have never been switched back into more growth-focused assets.

Analysis shows that a hypothetical Westpac KiwiSaver Scheme customer on the median wage and making monthly employer-matched contributions of 3% p.a., who switched their $25,000 KiwiSaver balance from the Growth Fund to the Conservative Fund when the market bottomed out on 20 March 2020, would now have grown their investment to $50,919 before tax.

Had the customer remained in the Growth Fund and all other inputs stayed the same, their investment would now have grown to $60,726 before tax.

Based on assumed returns from the Westpac KiwiSaver Scheme Calculator*, that gap would continue to widen over time. For example, a customer who’d remained in the Growth Fund would have a $156,472 balance in ten years’ time, compared to $120,880 for a customer who’d switched to the Conservative Fund on 20 March 2020.

Over a 30-year time frame, the projected gap widens further to more than $225,000.

Westpac NZ General Manager of Product, Sustainability and Marketing Sarah Hearn says long-term investors who are not in the right fund will likely short-change themselves at retirement.

“The COVID-19 experience and more recent market fluctuations should serve as a reminder to regularly think about your investment goals, whether you’re saving for retirement or a first home deposit. That includes checking you’re in the right type of fund for you and your stage in life,” Ms Hearn says.

“Market volatility is normal and expected. Those of us who aren’t nearing retirement will see our balances affected by more economic peaks and troughs before we get there.

“For younger New Zealanders, the good news is there’s plenty of time to recoup any losses, and to reach your retirement goals by making a plan and sticking to it. Taking five minutes to check out our Westpac KiwiSaver Scheme Fund Chooser and Calculator, or equivalent tools, will help ensure you’re in the right fund and setting yourself up for the future you want."

Ms Hearn says the new Westpac High Growth Fund aims to provide the highest returns of all the Westpac KiwiSaver Scheme funds over the long term.

“However, it is also likely to experience the most short-term volatility, so is better suited to people who have at least 13 years before they want to use their KiwiSaver savings, and who are comfortable with greater movements in their balance, both up and down.

“We expect strong demand for this fund, as our average KiwiSaver member age is younger than the market average and therefore our average customer has a longer time horizon for their investment.

“We encourage every KiwiSaver member, regardless of their age, to be engaged in their investments and to seek expert advice if they’re not sure they’re on the right track.”

Note:

Table 1: Summary of the 18,140 Westpac KiwiSaver Scheme switches into more defensive funds processed during peak COVID-19 volatility:

Table 2: Present (at 10/09/2024) and future value of $25,000 invested in the Westpac KiwiSaver Scheme Growth Fund in March 2020, with subsequent contributions of 3% p.a.:

Note: Calculations for Table 2 are based on a hypothetical customer earning the median wage at June 2020 of $1,062 per week and adjusted upward by 3% each subsequent year; and making monthly KiwiSaver contributions of 3% p.a. matched by a 3% p.a. employer contribution. Values in the “Present day” row are before tax.

*Future Investment returns are based on assumptions from the Westpac KiwiSaver Scheme Calculator. The calculator contains information of a general nature intended to help you determine what your KiwiSaver balance might be at retirement. It is not intended as, and should not be taken as, a financial advice service, or a recommendation or opinion in relation to any particular financial product or action. For full information, visit www.westpac.co.nz/kiwisaver-investments/kiwisaver/kiwisaver-calculators/kiwisaver-calculator/

Investments made in the Westpac KiwiSaver Scheme do not represent bank deposits or other liabilities of Westpac Banking Corporation ABN 33 007 457 141, Westpac New Zealand Limited or other members of the Westpac group of companies. They are subject to investment and other risks, including possible delays in payment of withdrawal amounts in some circumstances, and loss of investment value, including principal invested. None of BT Funds Management (NZ) Limited (as manager), any member of the Westpac group of companies, The New Zealand Guardian Trust Company Limited, or any director or nominee of any of those entities, or any other person guarantees the Westpac KiwiSaver Scheme’s performance, returns or repayment of capital.

BT Funds Management (NZ) Limited is the scheme provider and issuer, and Westpac New Zealand Limited is a distributor, of the Westpac KiwiSaver Scheme. The information above is subject to changes in government policy and law, and changes to the Westpac KiwiSaver Scheme, from time to time. Investments are subject to risks, including loss of investment value and principal invested. A copy of the product disclosure statement for the Westpac KiwiSaver Scheme is available from www.westpac.co.nz/kiwisaver.

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