Retirement savers told: keep calm

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by George Clark

Kiwisaver providers are urging contributors to remain calm, budget accordingly and know the system in the wake of the biggest economic shift since the global financial crisis in 2008.

That is the message from AMP Wealth Management chief executive Blair Vernon, who says there are arrangements for hardship.

“Our main message at the moment is to stay calm and hold back from any rash decisions. A lot of people have decided to switch to conservative or so called low-risk funds and in many cases that is completely at odds with their long-term horizons. If you are a 25-year-old with upwards of 40 years until retirement, it will certainly leave you crystalising losses.”

Mr Vernon said people needed to stand back and think about their retirement plan.

“These are the core principles of investing: have a plan and then think about your horizon.

look at your KiwiSaver balances and see it going down. I think conceptually it is a new experience for New Zealanders, because for the most part, the last time we saw a big downturn (which was the global financial crisis) most people did not have very much in their KiwiSaver, so they did not have very much by way of unitised holdings in other assets, which is what KiwiSaver is,” he said.

“It is not a bank account.”

Covid-19 is creating a level of uncertainty for many in the community but Mr Vernon said it was important to continue a contribution, if it fitted in your budget.

“There are an awful lot of people in the community who are experiencing being laid off. If you are in employment, keep contributing. The units you are buying today are 20% to 30% cheaper than this time last year. If you are in a household that needs to budget immediately, I would recommend sitting down very quickly and doing so.”

Mr Vernon said if people were under financial stress and needed to access their superannuation funds, there were systems to do so.

“There are arrangements for hardship, they exist in KiwiSaver today. You have got to show that you are under substantial financial distress. A lot of people misunderstand that we do not make the calls on whether you meet the requirements, they are governed by trustees, which are independent parties. What we are doing as an industry is talking to the regulator and government about simplifying the process right now,” he said.

“If you are in financial hardship, talk to your provider now.”