Your KiwiSaver Questions, Answered by Susan Edmunds

How much do you really know about your KiwiSaver account? Have you thought about whether it meets your future needs, if you’re contributing enough, and how much risk you’re comfortable with? In her latest book, financial journalist Susan Edmunds answers common questions about KiwiSaver. This book is for New Zealanders of all ages, whether you’re just starting out in the workforce, somewhere in the middle of your working life, or considering retirement.

Edmunds is a business journalist, podcaster and author who specialises in personal finance. She’s RNZ’s money correspondent and has written many Stuff articles on money matters.

Rather than letting our KiwiSaver “tick along in the background” with only an occasional glance at the balance, Edmunds makes it clear why we should take a more active approach to our investments.

For many New Zealanders, a KiwiSaver is likely to be their biggest asset, outside their home if they own one, by the time they get to retirement. Managing it well, and knowing how the scheme works, can help you get more out of it...

After a short introduction, each of the following 12 chapters addresses questions such as How Much Do I Need to Save?, How Can I Stay on Track?, and Can I Use My KiwiSaver Now? Edmunds also clears up common myths about KiwiSaver. For example, that people only need to worry about KiwiSaver once they near retirement, and that all providers are the same. If you need to make some quick decisions, at the end of each chapter Edmunds outlines short-term actions, as well as questions or points to consider.

Don’t overlook the “experts’ top tips” section, which includes advice for improving KiwiSaver performance. These tips, and the case study that follows them, seem out of place within the KiwiSaver Myths chapter. They could have been put into their own separate chapter.

Edmunds explains that joining KiwiSaver is optional, although everyone is signed up automatically when they enter the paid workforce. If you don’t want to contribute, you must make a prompt decision to opt out.

The book has plenty of real-world examples and case studies, as well as information from fund managers, former Ministers and Retirement Commissioners, research reports, actuaries and others. There are clear and simple explanations for financial terms such as ‘correction’, ‘bull’ and ‘bear’ markets, and the glossary at the back of the book defines other terms. The reference list will help you to track down more information too. Edmunds notes that successive governments have made changes to the scheme over time, and there may yet be more changes ahead.

Edmunds stresses that deciding how much to save depends entirely on your own circumstances and must allow for changes in financial commitments. Chapter 11 has a list of the key life stages when it’s wise to reassess your KiwiSaver contributions – when you get a pay rise, for example, or if you combine finances with a partner. A couple of hours spent checking if your current fund is right for you, and taking action if it’s not, could mean that you save substantially more over time.

Edmunds also makes it clear that even if your income is ‘average’ it is still possible to save a lot of money, particularly if you start as a young adult.

   …if you start contributing early and keep going throughout your working life, you can end up with a large amount invested.

…time is your friend and a really powerful tool… Not only does it give you longer to put more money into your fund through your regular contributions and build up your balance but you have longer for returns to accrue and compound.

Look closely at your employment contract, Edmunds cautions, to check whether or not you have a ‘total remuneration’ package. This determines whether your employer’s KiwiSaver contributions are included in your total pay package or paid on top of your salary. 

The large green arrow on the cover dips midway, then reassuringly rises again. This, suggests, Edmunds, is the likely long-term trend for your KiwiSaver investment. Markets will go up and down, and we need to accept that fluctuations are normal.

No one can predict the future direction of the financial markets… They can go up as much as they can go down. … If you have a long-term perspective, don’t worry about what appears to be a loss… [Fund manager]

This book prompted me to reconsider my own KiwiSaver approach, and I’ll share the book with other family members too. Although it’s easy to read, Edmunds asks some challenging questions. Above all, she simplifies topics that are often confusing. Her insights will boost your confidence and help you to get the most from your own KiwiSaver investments.

Reviewer: Anne Kerslake Hendricks

Upstart Press