To most of us, assessing our KiwiSaver fund’s performance is a bit like negotiating with Winston Peters – it’s never as simple as it seems.
Assessing the performance of your KiwiSaver fund isn’t as simple as looking at the increasing balance. In fact, you could very well see your account balance trending up from month to month, even when your fund may be losing money, or not earning as much as similar other funds. Let’s take a look at the factors that influence your KiwiSaver balance, and how you can assess how well it’s performing.
Why is this important?
In the past five years, across all KiwiSaver funds (over 200 on offer), their performance returns have ranged anywhere from 2.5% p.a. to 17.4% p.a. – a pretty substantial difference. Consider someone on a salary of $60,000 and contributing 3% to their account for the last five years;
In the lower performing fund above, as of now they would have a balance of around $19,200. In the higher performing fund above, they would have a balance today of around $29,700. That’s a $10,500 difference in just 5 years!
Somewhere in there, is your fund.
Deciphering your KiwiSaver account balance
Your KiwiSaver account balance tells you how much your account is approximately worth. It’ll be approximate only because your most recent contribution or your rebate may not have been accounted for yet.
The balance in your KiwiSaver account, is made up of a number of items, including:
1. Contribution amounts you have made from your salary, plus
2. Contribution amounts your employer has made on your behalf, plus
3. Annual rebates you have received from the Government, minus
4. Taxes paid, minus
5. Fees, minus
6. Other expenses, and
7. Accumulated profits and/or losses your fund has made
As you can see, items (1) to (3) will always be positive, meaning it will add to your account balance.
Items (4) to (6) will always be negative, meaning it always reduce your account balance.
But, the final item (7) is dependent on how your fund manager performs, and could be positive or negative. This could either add value to your account, or reduce the value of your account balance.
What this means is that even though you may see your account balance rising over a period of time it could be possible that any losses suffered by your fund are being hidden by the positive flows from items (1)-(3). Like when you keep buying bread, but your roommate secretly steals a couple of slices from each loaf – you don’t notice there’s a problem, but there is.
Keeping track of your KiwiSaver fund’s return
Since the inception of KiwiSaver in 2007, scheme providers have been continuously improving how they communicate with their members. While some have been driven by legislation, others have been by their own initiative.
On PocketWise, we keep track of how your fund has been performing from quarter to quarter, as well as compare it for you against other similar funds. Why not take a couple of minutes to to find the best KiwiSaver fund that suits you. You can also compare your existing fund to find out exactly how well (or not well!) it’s been performing.
Happy saving,
The PocketWise Team