As I am Muslim and forbidden to receive interest I have chosen the high-risk plan for my savings. I am 60, so five years to go. But what I would really like is to put all my savings into Bonus Bonds and to have any winnings reinvested. Is this possible?
The conventional investment thinking suggests tipping your money into growth assets like you have when there is a longer time frame, at least 10 years, until you need the money.
These growth assets, such as shares and property, carry a higher risk of losses but are also more likely to have bigger gains, taking the sting out of any losses over time.
Generally investors aim to shift their money to lower risk cash or interest-bearing assets as they get closer to needing the money for, say, retirement.
The gains on the investments are more likely to be steady, without the risk of unwelcome or ill-timed losses.
But this is where you, as a Muslim, run into problems.
As you point out, under sharia-compliant finance accepting interest on loans is forbidden and the vast majority of KiwiSaver funds will have some form of interest-bearing assets in the mix.
Bonus Bonds are not an option either - it's not an investment you can make KiwiSaver contributions into and it falls foul of sharia banking law as a type of maisir, that is, gambling or speculation.
I spoke to barrister and managing director of the sharia-compliant Amanah New Zealand KiwiSaver fund, Brian Henry, about how to invest in KiwiSaver as a Muslim.
When it launches this month Amanah New Zealand will be the only KiwiSaver fund that will act in accordance with Islamic principles.
"What she wants to look for is an investment that is properly structured in accordance with sharia law, which means it does have an Islamic advisory board and it's got to have a system set out where it purifies investments," Henry says.
Amanah's investments will focus on investing in up to 50 listed United States companies producing in-demand goods and services, alongside some US cash holdings.
Investment in business under sharia-compliant finance is allowed but your fortunes must be directly tied to the business' gains and losses - you can't sit back, secure your investment against the business owner's assets and force them to sell their house if the business fails.
The companies selected for investment by Amanah must be easily bought and sold on the stock exchange, with the stock trading in reasonable volumes throughout the day.
Excluded from Amanah's investments will be interest-bearing products, borrowing against your investments, derivatives and businesses involved with alcohol, liquor, pork, haram (sinful) meat, gambling, nightclubs, pornography, development or sale of weapons, tobacco, stem cell research or products or other activities that are contrary to sharia law.
A company will be dropped from the portfolio if there is a suspicion its activities are non-compliant.
According to its prospectus Amanah will also use purification payments to "cleanse any investment income that may have been generated by a corporation from non-permissible activities (for example, pork and alcohol)".
Purification payments for each stock will be calculated with the assistance of US-based Islamic financial information provider IdealRatings then paid through a donation to charity every three months.
"The amount of purification varies between stocks and is based on the portion of the corporation's income that is derived from non-permissible sources," the prospectus says.
The focus for its investments will be on businesses with a low level of debt and organic growth delivered by producing real and tangible goods and services.
Although this fund ticks all the boxes for sharia compliance Henry says it also meets the requirements for other religions, including Mormons, orthodox Jews and Seventh Day Adventists and could also appeal to someone who doesn't agree with money lending.
"We're an ethical fund but we have deliberately gone out of our way to make sure we've got a sharia-compliant system by having the Islamic advisory board," Henry says.
At launch there will be a single fund to invest in but as the investment pool grows Amanah will look to offer different, sharia-compliant KiwiSaver options.
*Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication.
It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.
To have your KiwiSaver questions answered by the Herald's panel of industry players, email Helen Twose, helentwose@gmail com.