This article was published on 11 December 2021. Some information may be out of date.

QI am over 65. I have continued my KiwiSaver account in ANZ’s Balanced Growth fund. I have placed nearly $150,000 in it.

During the last two or three months it is not showing any growth. My intention is to grow the money and not use it for income as I have other sources of income currently.

Where should I invest so that there is good growth and my money is safe, and also I can take out whatever I need without a penalty?

ADon’t judge a book by its cover, nor a KiwiSaver fund by its short-term performance. How the fund does over a few months, or even a year, is not important.

In a growth fund such as yours, not only will your balance sometimes go nowhere for a while, but it will sometimes plummet. However, over a decade we expect it to rise — usually more rapidly than in a less volatile, lower-risk fund.

The Smart Investor tool on says your fund holds 64 per cent shares, 19 per cent bonds, and some property and cash. About half the fund is invested in international shares, which have grown well through 2021, but not so well just lately. It’s nothing to worry about.

You should consider, though, how you would feel if your balance halved in a share market crash. If you would panic and switch to a lower-risk fund — turning your paper losses into real losses — you should make that switch now while there is no loss.

But if you know you would stay the course, your balance will rise again, although it could take a few years.

That leads me to another important point. I hope you’re not planning to spend the money for at least ten years — to give it time to recover from a prolonged downturn. If you expect to spend it sooner, it would be wise to switch to a medium-risk fund and, as the spending time approaches, to a low-risk fund.

On withdrawing your money, as an over-65 you can take it out of KiwiSaver whenever you want to — although it may take a few days to set up withdrawals. Ask your provider about that in advance.

On safety, while your balance will bounce around, it would be really surprising for you to permanently lose money. KiwiSaver funds are closely monitored by their supervisors and the government.

You might, though, consider moving to another KiwiSaver growth fund that charges lower fees. Your fund charges 1.39 per cent a year, which is lower than the 1.47 per cent average for growth funds. However, Smart Investor lists seven providers that charge less than 1 per cent.

Why do fees matter? Read on.

QSeveral items in your column last week dealt with fees, and one example seemed seriously over the top.

However, I think people who focus largely on fees are looking at only one part of the equation. After all, a net return of 3 per cent a year after a fee of 1 per cent is not as good as a net return of 6 per cent after a fee of 2 per cent.

Personally, I make little use of managed funds except for a few Exchange Traded Funds (ETFs) listed on the stock exchange. People should know more about these.

AThere’s no question that your return after fees — in KiwiSaver or any other managed fund — is way more important than the fees themselves, as your example shows.

The trouble is we have no way of predicting future returns. Research shows us, over and over, that past high returns are often not repeated. Sometimes they continue for a few years, but then Oops!

On the other hand, fees are highly predictable. Occasionally a provider changes their fees, but not often.

Research also shows that, on average, high-fee funds don’t produce better returns than low-fee funds at the same risk level. This means that a valid comparison is:

  • A 3 per cent before-fees return, with fees of 1 per cent.
  • The same return but with fees of 2 per cent.

Clearly, the fund with the lower fees is better. In the absence of knowledge about future returns, it’s a better bet to choose a low-fee fund.

Interestingly enough, your favoured investments, exchange traded funds, are nearly all low-fee index funds. I agree that they can be good long-term investments. But it’s best to firstly get the most out of KiwiSaver, by investing enough there to receive the maximum contributions from the government and your employer.

QYou always say to look at KiwiSaver fees and I’ve never been that bothered before. But seeing in recent columns how high the fees can get with a bigger balance has been eye opening.

I’ve just checked my fund and there’s a 1 per cent base fee and 0.95 per cent performance fee. At a balance of $45,000 I’m ok with those fees right now, as the fund has performed well, but I’ll keep a closer eye on that in the years to come. Thanks for highlighting this for me.

AAnd thanks for writing. Can I just suggest that you read the previous Q&A, about how good performance doesn’t necessarily continue.

Sure, your fund manager may have made some good calls in recent years, but what about the future?

Note, too that many people are impressed with their KiwiSaver performance in recent years, not realizing that all funds have done unusually well simply because the markets have grown heartily. For example, according to Smart Investor:

  • The return for the average KiwiSaver balanced fund over the last five years is a very respectable 6.6 per cent a year after fees and tax. Over the year ending 31 March 2021 it’s a terrific 17.1 per cent.
  • For the average growth fund, it’s 9.1 per cent for five years and 27.3 per cent for the year.
  • For the average aggressive fund, it’s 11.7 per cent for five years and 36 per cent for the year. If the 36 per cent continued, your money would double in just two years.

Don’t expect those returns to continue though. The astonishing one-year figures are because the year started near the bottom of the Covid-19 downturn in early 2020, and ended after the remarkably quick recovery. It included all the upturn and none of the preceding downturn.

If your KiwiSaver fund didn’t perform well over that period, something would be wrong.

Even though your balance isn’t huge, high fees will still impair its growth. If I were you, I would switch to a low-fee fund now.

QThe recent letters relating to the benefit have prompted me to write.

The biggest problem facing single parents on a benefit is the rate of clawback on their benefit as they gain work. It is exacerbated in many cases because they start without work experience and therefore can only expect a low wage.

A solo parent can realistically work up to 20 hours a week (during school hours) to maintain a normal family environment, but after they start working more than about 4 hours, the clawback on their benefit is such that the extra hours worked are for little or no financial gain.

They have to either pay someone to look after the family while they work a 40-hour week or stay on the benefit and struggle to live.

The climb out of the benefit is not only a mental mountain, but also a physical and financial one.

Your readers should never underestimate the difficulties that many beneficiaries face, nor admonish their situation by trying to further undermine their position, which is often not by their making.

AI fully agree. The “walk a mile in their shoes” cliché is appropriate.

The clawback situation is tricky though. If the government lets a beneficiary earn a fairly good income before their benefit is cut, there would be an outcry not just from beneficiary bashers but others earning the same pay or less, who can’t add the benefit to their income.

And if you let someone keep their benefit while earning for a short period and then gradually reduce the benefit, their financial situation might keep deteriorating, which is hardly encouraging. Whatever is done, there’ll be somebody crying, “Unfair!”.

Still, I think the government should err on the side of generosity to beneficiaries trying to re-enter the work force. In the long run everyone is better off when they succeed.

QThough we live in a welfare state, I disagree strongly with your statement last week that “those New Zealanders who then strike major health problems have earned the right to support from the state.”

Where in the constitution, if there ever was one, or the political party in power does it state that we have this right? And even if there is some right to state support, in my considerable experience those who are on long-term benefits seldom contribute much if anything in the way of taxation to the state coffers.

AThis is a classic case of a quote out of context.

What I said last week was: “But an argument can be made that contributing New Zealanders who then strike major health problems — as last week’s correspondent did — have earned the right to support from the state.”

Firstly, I said “an argument can be made”. I wasn’t stating a fact.

Secondly, you omitted that I said “contributing New Zealanders.” Many beneficiaries have earlier paid taxes for decades, or done a sterling job of raising children, or served the community. Those are all important contributions.

Thirdly, I don’t think the only rights that count are the ones spelt out in a legal document. It seems to me that anyone living in New Zealand has the right to be treated decently, simply because that’s the way we do things.

Hey, it’s Christmas time. Please stop being mean. It will make you happier, I promise!

Meaningful Christmas Gifts

Many charities offer Christmas gift programmes. You buy items for people in need that are given on behalf of your family or friends. For example, you might donate money for school equipment in developing countries. You receive an acknowledgement to give to your relative or friend to show what they have “donated”. It makes a great Christmas gift — more meaningful than buying stuff for one another that is often not wanted.

Each year, this column runs a list of charities that take part in these programmes. I’ve asked each one to describe their programme in 20 words or less:

  • Caritas Aotearoa New Zealand: 0800 22 10 22. “Caritas Gifts of hope, life, peace and learning enable our life-changing work around the world and in Aotearoa New Zealand.”
  • ChildFund New Zealand: 0800 808 822. “Give new ChildFund Gift Cards this Christmas. Less stress for you, more choice for your loved ones in helping children.”
  • Christian World Service: 0800 74 73 72. ‘Give someone special a gift that brings joy –school for a child, a garden for a family, a rainwater tank.’
  • Leprosy Mission New Zealand: 0800 862 873.. “Share God’s love with people facing leprosy this Christmas; access to the Cure $20 School bag $10”
  • MEND NZ — Mobility Equipment for Needs of the Disabled: 021 060 9631. “Give African or Himalayan youth a limb to walk to school or hearing aid to hear for the first time.”
  • Oxfam Aotearoa: 0800 600 700. “Give a gift with a purpose — every Unwrapped gift card helps transform the lives of those in need.”
  • Save the Children New Zealand: 0800 167 168. “Give the gift of a bright future! From clean water to a school library, your Good Gift helps kids thrive.”
  • Tearfund: 0800 800 777. “Give medical care to refugees ($15), give a hen ($20) or a goat ($55) or help survivors of trafficking ($35)”
  • The Fred Hollows Foundation NZ: 0800 227 229. “Give unique handmade gifts to friends and family while helping restore sight to someone in the Pacific.”
  • The Salvation Army. “Give a gift that tackles poverty and injustice in the Pacific and around the world.”
  • World Vision New Zealand: 0800 800 776. “Add changing a life to your shopping list. From chickens and goats to virus-fighting handwashing stations — World Vision’s Smiles gifts.”

No paywalls or ads — just generous people like you. All Kiwis deserve accurate, unbiased financial guidance. So let’s keep it free. Can you help? Every bit makes a difference.

Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions are personal, and do not reflect the position of any organisation in which she holds office. Mary’s advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to [email protected] or click here. Letters should not exceed 200 words. We won’t publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.