Q. My husband and I are school teachers in our late 20s. We started working five years ago and joined KiwiSaver back then. Our plan is to withdraw as much as we can to buy our first home. I am expecting our first child in January and will be taking two years off work.
We haven't been tracking our KiwiSaver balances up until now but when we compared we discovered quite a difference. I have been in a Mercer fund since I started while my husband was with AMP but switched to the Fisher Growth Fund soon afterwards. He has a balance of $23,200 while I only have $18,800. We are on the same salary scale and are both contributing 3 per cent. Why the difference?
A. The simple answer is that your husband is in a growth fund which has a larger allocation to shares while you are in a default fund which - like all the default funds - is conservative with a much lower allocation to shares.
Markets have been very strong since 2012 and with the increase to 3 per cent for employer and employee contributions from April 2013 investors in the higher risk funds have seen their balances increase significantly compared with lower risk funds.
Did your husband switch to the Fisher Growth fund because he wanted to take more risk with his KiwiSaver? While that is often recommended for younger investors, the downside is that he is planning to withdraw a significant chunk of his money to buy a house within the next few months.