kiwisaver worth a punt?

[lovegear]

There I was sipping my morning cup of tea, browsing the Dom, when I read a headline that had me spilling the stuff all over it:

Every Kiwi should take the $1000, says expert

http://www.stuff.co.nz/stuff/dominio...4a6034,00.html

$1,000 sound like a gift horse, but said expert fails to take into account the magic of compound interest! To illustrate, below is a table that shows the ammount you would get after 10, 20, 30 and 40 years assuming a DIY savings scheme earns just 1.5% more p.a. than kiwsaver. Also assumed is you contribute to the scheme the minimum ammount (4% of gross income) for just one year and take 'contribution holidays' thereafter. Figures in bold are where DIY wins out...


Income 30000 60000 90000 120000 150000
contribution 2200 3400 4600 5800 7000
(4% of gross income, including the 1,000)

Retirement payout in kiwisaver, assumed return 8.5% p.a.
10 years 4974 7687 10401 13114 15827
20 years 11247 17381 23515 29650 35784
30 years 22138 34213 46288 58363 70439
40 years 47794 73863 99933 126002 152072


Retirement payout in DIY scheme, assumed return 10% p.a.
10 years 3112 6225 9337 12450 15562
20 years 8073 16146 24219 32292 40365
30 years 20939 41879 62818 83757 104696
40 years 54311 108622 162933 217244 271556

[minimoke]

The Government is very keen to see that any KiwiSaver product does not fall over. They don’t want to see Mums and Dads burnt from their investment as it is the Govts attempt to encourage people into a savings routine. What this means is that the KiwiSaver products have to be low risk, which in turn means the yields have to be low.

Lovegear I think your model is interesting except the 8.5% return is too generous. Try it at current bank deposit rates.

As an aside another interesting lesson from the Government is if you do nothing you get something. Eg if you don’t save we’ll give you $1000.

[CJ]

Yes but you can take it out afer X years to buy your first house.

Not worth returning to NZ for though. think I will stay in London a bit longer (Australian tax rate reduction looking interesting as well).

[minimoke]

quote:Originally posted by CJ

Yes but you can take it out afer X years to buy your first house.

You won't be able to withdraw your $1,000. That gets locked in until retirement.

[lovegear]

Minimoke, I might go for it still if I can get an exposure to exotica not in my current portfolio (such as an Eastern European emerging market growth fund), but I don't suppose such things will be on offer if they are going for mediocre "balanced" funds [xx(]

[thereslifeafter87]

Kiwisaver is utter cr*p.

It's the only reason we're facing this capital gains tax!

The Australian scheme is 10x more effective and simpler.

Savings are forced. Employers have to contribute 9% of an employees salary to a scheme. This is what is driving the Australian funds management industry.

We need a compulsory super in NZ.

[shasta]

I agree TLA87 we need compulsory super.

Have recently joined my work scheme & i'm paying 5% of my salary, which gets matched by the company.

Being 30 this year, leaves me plenty of time to accumulate a decent retirement fund, & i get to choose the fund its invested in myself.

The Aussie scheme is generous, although i read that FBU has endorsed the Kiwisaver scheme & will top up its workers contributions by another 2%.

I hope the Govt looks at tax breaks/incentives for employers to assist there staff with super contributions.

[minimoke]

Look forward to Stage Two – which will be the introduction of compulsory employer contributions. Stage One KiwiSaver will put in place all the infrastructure that is necessary – a simple piece of legislative change is all that will follow. Stage Three will be compulsory employee contributions.

[Mr_Market]

Unfortunately wages will go down to compensate. The loser will still be the employee, who now a) gets some of his take-home pay taken away and b) is restricted as to where his money can be invested.

[rmbbrave]

ING gives biggest saving of KiwiSaver providers
ING will be the cheapest of the KiwiSaver default providers and AXA will be the most expensive.

Papers submitted to the government actuary by the six default providers - the firms who will provide KiwiSaver accounts and funds for savers who do not pick a fund provider themselves, or have one picked for them by their boss - show monthly fees on accounts range from $2.75 at ING and Tower to $3.06 at AXA.

Annual investment management and trustee fees will range from 0.534 per cent at AXA, the most expensive fund manager, to just 0.25 per cent at ASB Group Investments, though while all the other managers are active managers, ASB is a passive manager, providing passive funds which track markets and are much cheaper to provide.

As well as the above, there will be other costs which KiwiSavers will not see, such as the costs of buying and selling shares.

The KiwiSaver fees compare well with other super savings schemes, even that offered by the government to its own workers, the State Sector Retirement Savings Scheme.

For example, ASB Group Investments charges government workers $2.50 a month account fees, and between 0.35 per cent a year for its cash fund and 0.49 per cent for its conservative, growth and balanced funds.

But the KiwiSaver default fund pricing looks sharpest when compared with regular personal super savings schemes and smaller existing workplace schemes.

For example, Sovereign's Asset Architect personal retirement plan levies a fee of up to 25c in each $1 contributed in the first year, dropping to a maximum of 5c in the second year, and fund fees (including trustee's fees) run between 1% and 1.5 per cent a year.

AMP's current workplace super scheme charges fees of up to 2.5c in every dollar saved, has a $6 monthly account fee, trustee fees of between 0.05 per cent and 1 per cent (depending on how much money has been saved by a firm's workers), and fund management fees from 0.375 per cent for the safest funds up to 0.7 per cent for growth funds.

The fees levied by the six KiwiSaver default providers cannot be raised for three years.

Other fund providers which offer KiwiSaver schemes - the likes of banks, insurance companies such as Fidelity Life and fund managers such as Fisher Funds - will be able to charge higher fees, though the government actuary must judge them reasonable.

http://www.stuff.co.nz/4034765a13.html