Hold the course during market volatility says ASB

07 April 2022

Volatile markets are continuing to cause concern for KiwiSaver members, but the majority of investors are sticking with their strategies and some are making the most of the lower market by making voluntary contributions. Many are also continuing to contribute if they are still working over 65 years old. 

The latest ASB KiwiSaver survey shows knowledge of KiwiSaver remains low, with just 26% of respondents ranking their understanding as high, and almost three quarters saying they feel they need to save more for retirement. This is likely to be compounded in coming quarters as high inflation, rising interest rates and volatile investment markets put pressure on returns according to ASB senior economist Chris Tennent-Brown. However, for those sticking to their long-term strategy, the lower market should be seen as an opportunity to maximise long-term gains.

"Over the last few volatile months, the number of people switching has remained at normal levels. This is really pleasing to see and it contrasts with the spike in switching that we saw in the early days of the pandemic in 2020. Nonetheless, when markets are volatile like they have been, those that switch tend to move towards more conservative options.

"One of the questions I get asked is when markets are volatile, should people stop making contributions and the answer to that is generally no - people should continue their regular savings if they can. Furthermore, when markets are down, making lump sum contributions and buying when investment values are low will benefit overall savings when markets recover."

Of those surveyed, almost a third said they had made additional voluntary contributions to their KiwiSaver with more than half of those contributing monthly or every few months. Some 40% said this was to ensure they received the full government contribution annually, with a further 29% saying it was an easy way to invest and 27% saying it was to maximise KiwiSaver returns.

"Whatever the reason, it's great to see people maximising some of the key benefits of KiwiSaver and it's good to see people making the most of the government's contribution. It's going to help them reach their savings goals and it's a smart financial thing to do, which is great

"Beyond voluntary contributions, another aspect is people contributing to KiwiSaver when they're over 65. Of the people within the survey that were still contributing over 65 years-old, 51% of them were receiving an employer contribution as well, which is great to see."

When asked if employer contributions to KiwiSaver should continue for those 65 years or older who were continuing to work, most respondents agreed. Data from Statistics New Zealand shows average life expectancy is increasing, meaning retirement savings need to last longer and almost three quarters of those surveyed feel they need to save more for retirement."We know people are tending to work longer before they retire. In fact, 74% of our survey respondents said they plan to retire after 65 years-old. So contributing to KiwiSaver after 65 is becoming increasingly important, as are employer contributions. While it's good to see just over half of employers still contributing for employees over 65, there are still 49% that aren't, and we think they should be if they can. Every little bit counts."

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