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Lockdown II: How Will My KiwiSaver Account Be Affected?

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Chaotic. Unprecedented. Turbulent. If you used one word to describe 2020, it would probably be one of those.

We’ve learned some lessons from the last lockdown, but there are still many uncertainties as to how everything will play out. At National Capital, we understand that you may have concerns about the impact of these recent events on your KiwiSaver account. In this post, we’ll try to answer some of those questions.

How will COVID-19 and the recent lockdown affect my portfolio?

Although New Zealand had a period of “normal” since the last lockdown, the rest of the world was still strongly affected by the pandemic. So although the recent lockdown may have a short-term impact on New Zealand companies and shares (the NZ investment part of your portfolio), it won’t have a strong impact on the international investments in your portfolio. This is because COVID has already been factored into the price of these international investments. 

Many of the funds that National Capital recommends are well-diversified between Australasia and Internationally. So if you have a well-diversified portfolio, your KiwiSaver balance will not be greatly affected by the recent news of us entering lockdown again. National Capital looks carefully into the underlying assets that KiwiSaver providers invest in and how these KiwiSaver funds are diversified. 

If we remember from earlier this year, the emergence of COVID across the globe resulted in a high level of volatility in share markets. If you are currently in a growth fund, COVID and the recent lockdown may cause you to experience greater swings in your KiwiSaver balance, which will also serve as an opportunity for greater returns. You should ride out these swings as you don’t intend to withdraw your KiwiSaver funds anytime soon. On the other hand, if you are in a conservative fund, your KiwiSaver balance will not be severely affected by recent events as most of your fund is not invested in share markets. When making KiwiSaver recommendations, National Capital looks at more than simply returns and fees; we consider your personal circumstances and goals so that your KiwiSaver strategy is based on your own situation, not that of the market.

 

I am looking to switch my KiwiSaver fund or provider. Is now a bad time?
As you may remember from the last lockdown, an estimated 50,000 Kiwis panic switched their KiwiSaver funds, leading to an estimated $3.5 billion in retirement losses. If you are in a fund that suits you already, tune out the market noise and stick to your KiwiSaver strategy. 

If you’re currently not in the right KiwiSaver fund (you can check here) then it's a different story. What you should do next depends on your personal situation.

 

I need to move KiwiSaver providers but I’ll still be in the same fund type.
If you are wanting to switch KiwiSaver fund providers but will be staying in the same KiwiSaver fund type, you may not be exposing yourself to more or less market risk by moving fund providers. National Capital recommends funds with high confidence that they will help better maximise your first home or retirement savings. For example, if you are advised to switch from one conservative fund to another conservative fund, our Authorised Financial Advisors believe that the recommended fund is the best place for you going forward. If you are in this situation and switch funds now, in the time of a pandemic, there is more to be gained and less to lose.

 

I need to move to a more aggressive fund.
If you have been given professional advice to switch to a more aggressive fund, now is the time to do so – right when things are more uncertain. At a volatile time like this, your active fund manager will be able to capitalise on cheaper asset prices where available. Ultimately, this means you will make more money in the long run – which is really what KiwiSaver is for – having as much as you can when you retire.

 

I need to move to a more conservative fund.
To answer this question, it depends on both your situation and the reason as to why you want to move to a more conservative fund. Are you moving because you intend to withdraw your funds soon? If this is the case, then you may want to do this now. This is because we may see asset prices continue to fall in 2020 – a risk you can’t take if you are planning to use your KiwiSaver funds soon. Of course, get personalised advice before making that decision.

If you have already seen your KiwiSaver balance fall, and want to now move to a more conservative fund just because of that, the switch may lead to long term losses and impacts to your retirement outcomes. If you are wanting to take some risk out of your portfolio, that’s fine. Although you would have benefited from doing this earlier, our Authorised Financial Advisors are happy to discuss your options based on things like your required returns, volatility capacity, and volatility tolerance to figure out what the next best step for you will be. 

 

The most important thing.

At a time like this, the safety and health of you and your loved ones is of utmost importance. We’ve stomped out COVID before and we can do it again. Remember to stay inside and stay connected with your friends and whanau. 

As a digital financial advisor, lockdown is a great opportunity for you to sort out your KiwiSaver account with us if you haven’t already. By getting good KiwiSaver advice, your savings can generate more money for you when it comes to retirement or buying your first home.

Spending 15 minutes now can save you thousands in the future. If you want to speak with us, email contact@nationacapital.co.nz, or you can book a phone appointment with one of our Authorised Financial Advisors.

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Want to sort out your KiwiSaver account during this lockdown?
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