Default KiwiSaver super accounts to increase in investment opportunity

16

Apr

New Zealand’s national super fund, KiwiSaver, has most recently announced the move of their default super accounts from “conservative” to “balanced”. KiwiSaver default super funds have long been “conservative” due to only 10-35% of funds in accounts being invested into growth assets.

However, with the change coming into effect in July 2021, the move to a “balanced” account means that default accounts will be increasing their funds invested in growth assets to 35-63%. The new change to balanced funds is aimed to benefit workers who have five to twelve years horizons.

As over 90% of KiwiSaver users are below the age of 60, experts believe that the transition will be greatly beneficial to youngKiwiSaver account holders, as there is a greater chance for their users to make more money off of investments with their super. With most default accounts being owned by younger workers with many years until retirement, any losses resulting from the change won’t be as impactful as they have time to recoup the losses that might result from a more aggressive allocation of their super funds.

In addition to the super default account changes from “conservative” to “balanced”, KiwiSaver has also announced that they will ban all their super accounts from investing in fossil fuel production and illegal weapons. Investment in companies that only sell but don’t produce fossil fuels like petrol will be allowed.

The ban also comes at a time where New Zealand is transitioning into a lower carbon economy. Experts also believe the ban makes sense in a global business context, as the world moves towards reducing emissions and the risk of investing into stranded assets is high, especially for KiwiSavers account holders with five to twelve years left until their retirement.


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