KiwiSaver 2023 – Holding firm as contributions feature

By Stuart Johnson, FMA Chief Economist

This year saw investment losses across major asset classes and risk profiles. It has been a tough time for investors. That said, it’s worth noting that the data for this report covers the year ending 31 March 2023, and many investments have recovered ground since then.

Regardless, it’s important for everyone to remember that investing is a long-term game: staying in the market and not constantly moving money around is the best way to achieve investing goals.

For those some way off retirement, that means consistently contributing, in good times and bad. While this happened markets bounced back.

For those nearing retirement, seeing investment losses can be distressing. But most people are unlikely to spend all their KiwiSaver investments in the first year of retirement. Leaving money in KiwiSaver means there is time for the balance to recover and avoids locking in any losses. The last few years’ data show that investors are doing just that, leaving money in their KiwiSaver accounts after turning 65, so their savings can continue to grow, and they can access it when they need.

This option – sometimes referred to as ‘drawdown’ – is available to KiwiSaver members over 65.

This report highlights two points of concern, I expect both driven by the cost-of-living challenges. Firstly, hardship withdrawals are up 36.7% compared to 2022. They hit their highest level in the wake of COVID lockdowns but it is concerning to see them rising again. It’s important for people to have access to hardship withdrawals when life goes badly off plan, but it’s a last resort. And once the acute issue has passed people need to continue saving for retirement.

Secondly, the number of members on savings suspensions is up 19.8%. That’s understandable if people are really struggling, but re-starting contributions as soon as possible will set them up for a better retirement.

The industry and the FMA have a role to play too. Over the coming year, we’ll be talking with KiwiSaver providers to understand how they support their customers to build savings habits and help them achieve their retirement goals.

We can categorise 2023 as a year when KiwiSaver ‘held firm’, when contributions proved more important than investment returns. But early signs suggest KiwiSaver will make more positive ground in 2024.

Read the latest KiwiSaver Annual report, PDF, 627 KB