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  1. #151
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    I think the longer term plan in NZ is for Kiwi Saver to become compulsory as it is in many countries. In addition, the percentages contributed by employers and employees will probably increase and it will eventually become the main retirement fund for most people. I lived for many years in Singapore and Malaysia. Both countries have had similar schemes for over 30 years. They are really well run and actively managed by government departments.

    I think some NZ Kiwi Saver suppliers adopt a passive or semi passive approach. I am in Simplicity who use Vanguard funds, are non profit and have very low fees. I have been very impressed with them so far.

  2. #152
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    Quote Originally Posted by Swala View Post
    I think the longer term plan in NZ is for Kiwi Saver to become compulsory as it is in many countries. In addition, the percentages contributed by employers and employees will probably increase and it will eventually become the main retirement fund for most people. I lived for many years in Singapore and Malaysia. Both countries have had similar schemes for over 30 years. They are really well run and actively managed by government departments.

    I think some NZ Kiwi Saver suppliers adopt a passive or semi passive approach. I am in Simplicity who use Vanguard funds, are non profit and have very low fees. I have been very impressed with them so far.
    Michael Cullen tried to make Kiwi Saver compulsory and i'm glad he failed. You mentioned in Singaporean and Malaysian pension schemes but the key distinction is they are gov't managed entirely (much like Canada's CPP system). The KS we have in NZ is nothing like that as individuals CHOOSE who will invest their funds. A compulsory scheme in this sense would be very bad because as in my previous post, it only benefits 1) the managed funds & 2) IRD. It's not a pension scheme that gives a real incentive for investing; well when compared to overseas ie 401K plans.

    There are plenty of KS funds that operate passively by buying the index ETF. However, there's a big problem. Their management fees do not correlate to say buying the Vanguard S&P500 VOO that has a 0.03% per year fee vs some of the NZ passive funds that charge 0.5 - 1% for essentially doing nothing as they buy VOO. Who is creaming more fees, Vanguard or the KS fund?

    Another thing that is not mentioned is the issue that NZ does not have a formal CGT. A savvy investor could invest up to $50,000 in total to their overseas index ETF like VOO and pay no CGT on the gains and let that amount compound until retirement. When you compare how many years it would take a person on say $50K a year income, contributing $3,000 a year under a KS scheme, that's a good 15 years before you reach that capital threshold limit where FIF kicks in. But I can assure you the KS route will not have a higher cumulative balance than if the individual were to invest directly (as the KS funds have taxation to address, less their mgt fees they charge).

  3. #153
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    If I am correct Simplicity doesn't have 100% cash fund for Kiwi Saver. I am particularly interested in preserving capital rather than capital gain. I do have a 100% cash fund but I found 40% of my kiwi saver has deposited in one bank. I am looking for 100% cash fund where there is a good number of diversification. I found Milford 100% cash fund as ideal place to transfer my kiwi saver. Do you have any experience with their fund management? At this juncture I am not interested in growth or balance funds. Thanks .
    Last edited by Valuegrowth; 12-09-2021 at 08:05 PM.

  4. #154
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    Quote Originally Posted by Valuegrowth View Post
    If I am correct Simplicity doesn't have 100% cash fund for Kiwi Saver. I am particularly interested in preserving capital rather than capital gain. I do have a 100% cash fund but I found 40% of my kiwi saver has deposited in one bank. I am looking for 100% cash fund where there is a good number of diversification. I found Milford 100% cash fund as ideal place to transfer my kiwi saver. Do you have any experience with their fund management? At this juncture I am not interested in growth or balance funds. Thanks .
    The problem with such a high cash investment (and assuming we are talking about fixed income assets such as bank term deposits, gov't bonds, corporate bonds aka junk bonds, income streams from other fixed term deposits such as in real estate, etc.) is you will not get diversification. While a higher proportion of investment into fixed income assets is considered less risky, it does not mean you will not lose. For eg. a high degree of this asset class (using cash) is invested in assets called 'debentures' and the terminology I see in NZ by various brokers selling these products do come up with some interesting terminology. Such as '1st ranking or 2nd ranking secured debenture' which is an oxymoron in that phrase. I recall some years ago when Hanover Finance had collapsed and yes, the vast majority of the investors lost out or some were able to retrieve maybe 50% of their initial investment. So while you may believe that such "cash funds" are diversified, they are far from that in reality.

    I am not trying to change your mind, but regardless of what you choose to invest in, there will always be some level of risk. One thing that is certain though, as Warren Buffet has spoken about is the time frame of risk is reduced, for the longer you hold the investment in equities. He boasts at a time when Berkshire purchased Coca Cola over 30 years ago, at a time when people thought he paid too much for it. We've see the stock market crash in March 2020, and various other crashes in the past. Yet the share price of KO continues to rise. So what he's saying is the compounded growth of the stock has grown so much that future stock market crashes will not go below to what you've paid for, as the longer you hold it. The DOW Jones was around 3,000 in 1990, 10,000 in 2000, roughly around 10,000 in 2010, and today it's around 35,000. Meanwhile, the return on gov't bonds has relatively been flat over the multi-decades and don't forget the inflation factor. We have people that still want bank term deposits that pay around 2.6% pa while NZ inflation has been over 3.6%. After you minus the RWT off interest income, your cash is really at a loss.
    Last edited by SBQ; 12-09-2021 at 09:55 PM. Reason: Grammar mistakes

  5. #155
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    Quote Originally Posted by Swala View Post
    Those are exactly the people that Kiwisaver is designed for. Probably the vast majority of the population.
    Yep, I totally agree. I put my minimum into my Kiwisaver each year to get the Government credits and not a cent more, but for a percentage of the population if they didn't have Kiwisaver they would just spend it on consumer goods instead.


    Quote Originally Posted by Valuegrowth View Post
    If I am correct Simplicity doesn't have 100% cash fund for Kiwi Saver. I am particularly interested in preserving capital rather than capital gain. I do have a 100% cash fund but I found 40% of my kiwi saver has deposited in one bank. I am looking for 100% cash fund where there is a good number of diversification.
    Valuegrowth I am betting that 40% allocation was with one of the big four Aussie banks, if thats the case I wouldn't worry about that at all. There are Kiwibonds available (and the interest rate has gone up recently) if you are really concerned about return of capital.

    Quote Originally Posted by SBQ View Post
    The problem with such a high cash investment (and assuming we are talking about fixed income assets such as bank term deposits, gov't bonds, corporate bonds aka junk bonds, income streams from other fixed term deposits such as in real estate, etc.) is you will not get diversification. While a higher proportion of investment into fixed income assets is considered less risky, it does not mean you will not lose. For eg. a high degree of this asset class (using cash) is invested in assets called 'debentures' and the terminology I see in NZ by various brokers selling these products do come up with some interesting terminology. Such as '1st ranking or 2nd ranking secured debenture' which is an oxymoron in that phrase. I recall some years ago when Hanover Finance had collapsed and yes, the vast majority of the investors lost out or some were able to retrieve maybe 50% of their initial investment. So while you may believe that such "cash funds" are diversified, they are far from that in reality.
    This is exactly the same terminology used for Term Funds by the big four banks, whilst they are lower down the risk chain of creditors, its still one of the safest places in the world to park your money. To compare between the big four and Hanover finance is ludicrous. The Australian government won't let one of them fail and they are very well capitalized in any case. If your Kiwisaver investments were loading up 40% fixed cash into a Tier 3 equivilant like Hanover I would be very worried.

  6. #156
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    Quote Originally Posted by Norwest View Post
    Yep, I totally agree. I put my minimum into my Kiwisaver each year to get the Government credits and not a cent more, but for a percentage of the population if they didn't have Kiwisaver they would just spend it on consumer goods instead.

    Valuegrowth I am betting that 40% allocation was with one of the big four Aussie banks, if thats the case I wouldn't worry about that at all. There are Kiwibonds available (and the interest rate has gone up recently) if you are really concerned about return of capital.


    This is exactly the same terminology used for Term Funds by the big four banks, whilst they are lower down the risk chain of creditors, its still one of the safest places in the world to park your money. To compare between the big four and Hanover finance is ludicrous. The Australian government won't let one of them fail and they are very well capitalized in any case. If your Kiwisaver investments were loading up 40% fixed cash into a Tier 3 equivilant like Hanover I would be very worried.
    While I agree in terms of safety, most banks are in a world of difference in credit risk when compared to Hanover. However, I will not go as far to say the 'big four' banks, and i'm assuming they're Australian ones, are in the same category of risk as the big financial banking players in the US. In fact, the problem with these 'debentures' is just that - NZ has NO depository insurance on cash holdings PERIOD. Hop over too Canada, banks there have CDIC and in the US, they have FDIC. US brokers even have more investment protection through SPIC. So before financial advisors in NZ continue to spew how 'safe' investments are with NZ banks, when compared to the US and Canadian banks, they are only telling half of the story. (fyi, the indication of credit worthiness also depends on the bank insuring client cash deposits).

    This kind of thinking reminds me of the discrepancies in the Japanese bond markets where investors within Japan are illusioned to the credit risks when foreign investors view Japan at an entirety different credit risk. In NZ, I would say a lot of that has to do with regulatory and tax policies creating a negative bias against overseas investments vs NZ/Aus ones.

    In my years of studying finance in Canada, this is what uni classes taught us on the definition of a 'debenture':

    https://www.investopedia.com/terms/d/debenture.asp

    "A debenture is a type of bond or other debt instrument that is unsecured by collateral. Since debentures have no collateral backing, they must rely on the creditworthiness and reputation of the issuer for support. Both corporations and governments frequently issue debentures to raise capital or funds."

    But what we have in NZ, I see confusing terms in bond prospectuses - "Secured First Ranking Debenture". And keeping with this Kiwi Saver thread, how secured are we really talking here on the fix term investment portion of the KS pool? (ie going from aggressive growth to conservative?) To me, a world class low risk bond would be the US Treasury Bills. Another would be any large US bank which would be > than any NZ/Aus bank.

  7. #157
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    Deposit garuntee of $100k to be introducted soon.

    https://www.stuff.co.nz/business/124...-means-for-you

  8. #158
    Senior Member Valuegrowth's Avatar
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    Thank you all for giving me some great ideas on Kiwi saver. I am looking forward to a fullback, correction or bear market in global markets to transfer my cash fund to balance fund, dividend fund or growth fund. I think in that way I can preserve my capital in some extend. Probably we may see bear market in 2022. Many predicted bear market from 2020 but still they couldn't stop the longest bull market.
    Last edited by Valuegrowth; 13-09-2021 at 08:03 PM.

  9. #159
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    ""Given that time horizon, we’ve built a growth-oriented portfolio that will generate strong returns over the long term and performs strongly in periods of market expansion," says Whineray."
    But why then does it have 16% ($7 b ?)in bonds?
    What is that achieving?
    Likely to have missed out on $2.1 b if had been invested in the same mix as the rest of its funds that likely returned over 30%
    https://www.goodreturns.co.nz/articl...or+14+Sep+2021

  10. #160
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    Quote Originally Posted by kiora View Post
    ""Given that time horizon, we’ve built a growth-oriented portfolio that will generate strong returns over the long term and performs strongly in periods of market expansion," says Whineray."
    But why then does it have 16% ($7 b ?)in bonds?
    What is that achieving?
    Likely to have missed out on $2.1 b if had been invested in the same mix as the rest of its funds that likely returned over 30%
    https://www.goodreturns.co.nz/articl...or+14+Sep+2021
    Gov't pension funds (and i'm speaking nation wide, long running, funds) must operate within careful boundaries. I am actually surprised they have a 16% bond holding allocation. There is no need to question that.

    Perhaps the most significant benefit in question is how well the NZ Super fund has done compared to all the other Kiwi Saver funds have done? After all both are trying to achieve the same goal and it annoys me how the gov't seriously screwed this up by having Michael Cullen serve Kiwi Saver to the masses when the same objective can be easily achieved at the NZ Superannuation Fund level. As mentioned before, IRD is the primary beneficiary of having Kiwi Saver. Second would be the fund managers, and finally 3rd would be the investors. The NZ Superannuation Fund does not discriminate on who receives the pension at retirement. There are no transaction costs associated from having individuals wanting to change from 'conservative' to 'aggressive' allocation, and certainly there is no IRD or tax paperwork involved.

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