News | Features
11 Aug 2022 12:29
NZCity News
NZCity CalculatorReturn to NZCity

  • Start Page
  • Personalise
  • Sport
  • Weather
  • Finance
  • Shopping
  • Jobs
  • Horoscopes
  • Lotto Results
  • Photo Gallery
  • Site Gallery
  • TVNow
  • Dating
  • SearchNZ
  • NZSearch
  • RugbyLeague
  • Make Home
  • About NZCity
  • Contact NZCity
  • Your Privacy
  • Advertising
  • Login
  • Join for Free

  •   Home > News > Business > Features

    The Investor: Why a Reader Advises Son Against Kiwisaver – and Why I Disagree

    A reader’s letter explaining why he’s advising his 18-year-old son not to join KiwiSaver has not convinced me.

    His first issue is with inflation. “I started work 40 years ago at $1 an hour. If KiwiSaver had been around and I'd invested that $1 (which KiwiSaver would have turned into $3) it would now be worth about $21, at 5 per cent a year, which is still now just an hour's wage roughly,” he writes. “On a personal basis, that $1 was more valuable to me then than the $21 is now.”

    The reader – let’s call him Fred - is actually being generous to KiwiSaver. Government and employer contributions no longer triple an employee’s contributions, except in the first year when they get the kick-start.

    Instead, from April next year, the contributions of someone on $20,000 will be multiplied by 2.3. At $60,000 they will be doubled, and at $200,000 they will be multiplied by 1.8. A non-employee’s contribution of up to $1043 will be multiplied by 1.5.

    So Fred’s $1 would have grown to around $14, not $21. But that’s not the point. While Fred might have needed more money when young, his son might be different. Life is unpredictable.

    Fred adds that inflation might speed up again. True. But if his son invests in a KiwiSaver fund holding largely shares and property, its value should rise with inflation.

    “Also”, Fred continues, “the likelihood of getting a consistent 5 per cent yearly average is doubtful - especially after the fund managers have taken their fees - which brings me to my second point...

    “If the manager looking after your money is driving an expensive new car and you're not, surely you're doing something wrong – and its probably letting him/her look after your money. The person with the largest vested interest in your money is you - so you should look after it.”

    My response: you certainly have more vested interest in your health than does your surgeon, or in staying out of prison than does your lawyer. But you pay highly for their expertise.

    How much a fund manager makes shouldn’t matter as much as how your investment performs. And because of employer and government contributions, an investment in KiwiSaver is hard to beat.

    In any case, some KiwiSaver providers charge pretty low fees, and I suggest that people go with them.

    Fred’s third reason holds the least water. “The time when I needed money most was when I was younger, with a mortgage to pay and children to rear.”

    It seems he hasn’t heard about the KiwiSaver withdrawal and subsidy to buy a first home – outlined at

    Even if his son doesn’t get a subsidy, his savings for his first home will always be bigger in KiwiSaver than elsewhere. He can withdraw his own and employer contributions plus returns on all the money, including on government contributions.

    And once he has bought a home, he can go on KiwiSaver contributions holidays if he prefers to concentrate on repaying his mortgage.

    Fred concedes that, “having followed this advice for 40 years I have no retirement savings. But I have not been concerned or directly impacted by the tides of interest rates nor by the cycle of depressions/recessions/market adjustments that seem to regularly destroy people's savings.”

    That’s like saying, “I have no education, but at least I’ve never had bad teachers”.

    He concludes, “I'm also very aware that this approach has been conditioned by the presence of NZ Superannuation, but can't see how we will end it and still remain a decent nation.”

    I agree that NZ Super probably won’t disappear. But it’s highly likely to be reduced from an already pretty basic level.

    I hope Fred’s son has a mind of his own.

    © 2022 Mary Holm, NZCity

     Other Features News
     10 Sep: Spring clean your finances
     13 Aug: Plan ahead to give yourself a debt-free Christmas!
     10 Jul: Wise up to clear credit card debt
     07 May: Ways to prepare for the unexpected
     30 Mar: Time for a financial progress check
     10 Feb: Studying up on NZ Super
     10 Jan: Managing the back-to-school bills
     Top Stories

    South Africa will start with hooker Joseph Dweba in Saturday's second Rugby Championship Test against New Zealand after Bongi Mbonambi withdrew due to a knee injury picked up in training More...

    Gas users and experts call for federal crackdown on east coast 'gas cartel' More...

     Today's News

    Law and Order:
    A youth has been charged with murder - over the death of Adrian Humphreys 11:49

    Living & Travel:
    Study finds all rainwater now unsafe to drink, Donald Trump pleads the Fifth amid investigation, and what's causing Australia's egg shortage — as it happened 11:39

    Hamish Kerr has become the first New Zealand high jumper to reach the podium at a Diamond League meet with third in Monaco - he cleared 2.25 metres 11:19

    Gas users and experts call for federal crackdown on east coast 'gas cartel' 11:19

    Law and Order:
    A Marlborough woman likely drowned after taking hallucinogenic drugs 11:09

    Donald Trump is "furious yet scared" after the FBI raided Mar A Lago 10:49

    Law and Order:
    A man with Nomad gang links has been arrested after a fleeing driving incident in Invercargill 10:49

    Global uncertainty is continuing to affect KiwiSaver balances 10:29

    Jennette McCurdy wants Ariana Grande to read her new memoir, 'I'm Glad My Mom Died' 10:19

    Anthony Albanese says Australia is the largest non-NATO contributor to Ukraine. Is that correct? 10:09

     News Search

    Power Search

    © 2022 New Zealand City Ltd