Many New Zealanders have some or all of their retirement savings in a superannuation scheme other than KiwiSaver. This may be a workplace savings scheme or another superannuation scheme.
Superannuation schemes are managed fund investments. When you save via a superannuation scheme, your money is pooled with other New Zealander’s in your scheme and is spread across different kinds of investments. Some schemes offer additional benefits such as life or disability insurance.
Unlike a bank term deposit, the return you get from your superannuation scheme will go up and down over time, depending on what it’s investing in. With some schemes the investment choice will be made for you. In others you’ll choose an investment fund.
Growth and aggressive funds typically have higher long-term returns
Growth and aggressive funds have a much higher proportion of ‘growth’ assets. Growth assets are things like shares and property and these go up and down in value more frequently than ‘income’ assets like cash and bonds. This means their returns may rise and fall quickly. However over time they typically provide a higher return.
Use KiwiSaver fund returns as a guide
Superannuation scheme returns aren’t shown in tools like Smart Investor as there are often special features of superannuation schemes that mean you can’t compare them directly to KiwiSaver funds. However you can use average KiwiSaver fund returns as a guide to what you should expect from your superannuation scheme.
Understanding the risks
Superannuation schemes are either monitored by a licensed supervisor or by us to make sure they meet the required standards and act with your best interests in mind. All superannuation schemes must be registered. The risks for individual schemes vary depending on the scheme structure.
Understanding the costs
Fees can have a big impact on your total returns over the longer term. It’s worth keeping an eye on the fees you pay because as your balance grows so will your fees.
How big your balance is – the bigger the balance, the greater the fee
The type of investment fund you’re in – generally lower-risk funds are cheaper than higher-risk funds (but remember lower-risk funds give less overall return)
The scheme provider – some providers charge higher fees than other
If you are in a workplace superannuation scheme your employer may part or all of the scheme administration fee.
Other fees may also apply
If you’re using a financial adviser they may also charge you a fee for their services. There may also be other fees for example if you:
change your investment options
transfer savings from another superannuation scheme
withdraw money from your superannuation scheme.
What to do before you invest
A product disclosure statement (PDS) will provide the essential information you need when joining. Compare the benefits of the superannuation scheme with joining KiwiSaver
A workplace savings scheme may offer higher employer contributions than KiwiSaver
You may also get additional benefits like life or disability insurance
Usually, you won’t receive government contributions and your money is paid out when you change employer
KiwiSaver moves with you when you change jobs
Detailed information about KiwiSaver is available on the Smart Investor tool. Superannuation scheme information is not available on this tool, but you can find additional information on the Disclose register.
Managing your superannuation scheme investment
Review your superannuation scheme account at least once a year. The ideal time to do this is when you receive your annual member statement.
Superannuation scheme providers must give you a personal annual statement
Your annual statement shows money that has gone in and out of your superannuation account in the past year.
The scheme’s annual report and fund updates are also useful
All superannuation schemes must give you a copy of their annual report, or a link to it on their website, within six months of the end of their financial year.
The annual report describes any changes made to the scheme in the last year, how it’s being managed, how investments have performed against the scheme’s goals, and if the auditor has raised any concerns. It also gives details of the size of the scheme’s membership, total funds invested and investment returns.
In addition to the annual report, you’ll also be able to access annual fund updates for the individual funds within your scheme. Fund updates let you see how your fund is performing, what it’s costing you and what your fund is currently investing in. You’ll find fund updates on the Disclose register.
Don’t be spooked if your superannuation balance falls
This is a normal part of investing and reacting by making changes when the value is low will often make things worse.