“The value of switches made to lower-risk funds during Covid was $1.2 billion, but only $121 million was moved back into higher-risk funds,” National Capital added.
“This means more than $1 billion of Kiwis’ money is missing out on the market rebound.”
Over the past four years, KiwiSaver fund switches had nearly doubled, from 240,000 in 2019 to a record high of 450,000 last year.
“Some of these will have been tactical, well-advised switches, but many weren’t.”
National Capital said Booster’s Socially Responsible High Growth fund was the best for ethical investing with “an almost perfect” score of 9.75.
That Booster fund excluded investments in fossil fuels, nuclear weapons, gambling and whaling.
It also restricted civilian firearms, tobacco, military weapons, alcohol, nuclear power, pornography, recreational cannabis, live animal exports, factory farming, genetically modifying organisms, animal testing, and palm oil production and plantations.
Superlife’s Ethica fund in the balanced category was also highly regarded by National Capital for ethical investing, as were Nikko, Juno, Pathfinder and Simplicity.
Now with a potential recession and concerns about the cost of living, National Capital said people should seriously consider investment decisions and seek advice from experts.
National Capital said its initial KiwiSaver contribution index was 4.30 per cent, lower than what it described as an optimal level of 6.3 per cent.
“This under-contribution does not bode well for Kiwis’ retirement prospects,” the new report added.
National Capital used a hypothetical case study of a a 40-year-old Kiwi who contributed 4 per cent to their KiwiSaver and had an average balance of $33,000, with a salary of $70,000.
The report estimated a person in this position would have a nest egg of $320,000 by age 65.
But that was about $80,000 short of what it said retiring Kiwis would need as a lump sum to receive a normal weekly income at retirement.
That lump sum estimate was based on a Massey University retirement expenditure guidelines survey.
The Value for Money Report said people aged 18 to 24 had the highest contribution rate at 5.34 per cent.
People aged 35-44 were the lowest contributors, at an average of 4.22 per cent of their income, according to the report.
In the first quarter of this year, KiwiSaver funds added about $3.6 billion in returns for investors.
“Overall, KiwiSaver funds did better this quarter, with an average weighted return of 4.21 per cent versus 2.10 per cent from the October - December 2022 quarter,” National Capital added.
That was due to better performance in growth assets.
The report found growth Funds contributed about $1.6b, with an average return of 5.13 per cent compared to an average of 2.82 per cent in the previous quarter.
Juno Growth Fund had the best quarterly performance, with 8.17 per cent.
Meanwhile, National Capital said Fisher Funds eliminated performance fees from its diversified KiwiSaver funds, bringing them in line with many other providers.
Simplicity held its position as the provider with lowest fees among growth, balanced, and conservative categories, according to today’s report.
Average fees varied greatly across different categories but high growth funds had the highest average fees at 1.12 per cent and conservative founds had the lowest at 0.61 per cent.
National Capital said the data in its report was is of a general nature and not intended to be personalised financial advice.
