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What fund should I be in now? (Getty Images).
What fund should I be in now? (Getty Images).

BusinessJune 3, 2020

My KiwiSaver is disappearing! Am I in the right fund?

What fund should I be in now? (Getty Images).
What fund should I be in now? (Getty Images).

In the third part of our series with Kiwibank answering your questions about Covid-19’s impact on New Zealanders’ finances, two readers at different ends of their saving journeys ask what to do with their KiwiSaver account. Melissa Vasta, Kiwi Wealth GM retail and product, responds.

Hi Melissa, 

My KiwiSaver ‘growth’ fund has been pummeled in the last month, and I’m pretty freaked out. Should I swap it to a more conservative fund to minimise any further losses or should I not touch it and wait for things to improve? I’m in my late 30s.

Thanks,

Freaked Out

 

Kia ora Freaked Out,

As a general rule, the time frame of the investment is the most important consideration when you’re choosing a KiwiSaver fund, so the main question is how long it will be until you’re likely to retire or withdraw from your KiwiSaver account to buy your first home.

If you’ve got more than 20 years until retirement and aren’t planning on making a first home withdrawal, you should generally be in a growth fund. There are a few exceptions though – one of them being that if you get particularly nervous every time the market drops then your tolerance for risk might be too low to be in that type of fund.

The key thing is for you to be in the right fund for your age and stage in life. And once you’re in a fund that you’re comfortable with, sit tight and hold on when the market moves. It does pay to reassess every few years, but where it can go wrong for people is if they move their money around too often in reaction to a fluctuating market, suffering the losses on the way down but not sufficiently benefitting from the rebound.

Remember there was a big upswing in the markets before Covid-19, so while we’re certainly down from the heights of a few months ago, on balance it hasn’t been as bad as it looks right now. Over the long term, markets tend to return – that’s what has happened throughout history, though you can’t guarantee they will again. People always adjust to the new normal of increases: when the market goes up, they tend to think of the new dollar value as their total savings and don’t factor in the chances of the market going down again. 

Having said all that, as a very broad rule people should be in a growth fund unless they have plans to retire or make a first home withdrawal in the next few years. If that’s your situation, it might pay to look at a more conservative fund to minimise any potential losses in the future – but be aware that if you switch while markets are down you will lock in any losses you’ve already experienced. If the market bounces back, you won’t benefit from that recovery as much as you might have if you had stayed in a growth fund. 

I recommend you spend some time on our Risk Profiler tool to help you figure out which fund you should be in. It will ask you some simple questions to help you understand your appetite for risk and to see how various outcomes could impact your savings in actual dollar amounts rather than percentages.

There’s no right answer for everyone, but if you can understand more about your appetite for risk, you can find a fund that will suit where you are in life, when you plan on accessing your investment, and what impact further losses would have on your financial plans.

Good luck!

Melissa

The global economy was left reeling by Covid-19 (Photo: Getty Images)

Kia ora Melissa,

I have four years to go until I retire and have my KiwiSaver account in a conservative fund. Should I move my funds to a higher risk fund to take advantage of bargains in the share market? Or should I leave it in the conservative fund to prevent any major losses at this time?

Yours,

Nearly Retired

Kia ora Nearly Retired,

As with my advice to Freaked Out, it’s key to look at your appetite for risk. If you’re in a conservative fund and see that the markets have dropped considerably, the reality remains that you only have four years until you retire so you have less time to recover from further losses if the market plateaus or continues to fall. So it really depends how quickly after retirement you plan on using your KiwiSaver funds. If you have other savings or income and you could leave your KiwiSaver funds in there for another 10-15 years, you may want to think about less conservative funds if you have the appetite for that risk. Have a look at our Future You tool, which will project what your balance would be in different time frames and funds. You can compare those projections with your savings goals and make sure whatever fund you’re in is a conscious decision, recognising the impacts of whatever risks you might be willing to take.

You say “take advantage of bargains in the share market” which assumes a level of knowledge about the market being correctly valued prior to any dip as opposed to potentially being inflated prior and correcting itself. For this reason, seeing stocks as “on sale” can be an optimistic way of looking at things, while still potentially advantageous if you’re working with disposable income. Certainly, if you’ve got money to invest that you’re not necessarily reliant on, you might see a market drop as an opportunity – but for a lot of people, the reality doesn’t work like that. If you transition to a growth fund now because of the bargains in the market and we see another drop in a year’s time, how comfortable would you feel at that point? 

Since you’re so close to retirement, you should seek advice from a financial adviser if you have access to one. Your KiwiSaver account is just one piece in the puzzle and it’s important that all the pieces align with your retirement plan. 

Congratulations in four years’ time!

Melissa


Please be advised that our response is based on information you have provided but there may be other things that we don’t know about your situation that would be relevant to the answers provided and would change the outcome. You should speak to a financial adviser before making any decisions or a budgeting service.

Information provided by Kiwibank and Kiwi Wealth is limited to providing a general response to the specific question and is based on the limited information provided. It does not take into account any additional financial information or possible financial solutions available. This shouldn’t be relied on as the sole basis for any financial decisions. For information and assistance for your specific situation, you should call a financial adviser. Kiwibank is a Qualifying Financial Entity (QFE) under the Financial Advisers Act 2008. For a full copy of Kiwibank’s QFE disclosure, please view this link for more information.  Kiwibank and Kiwi Wealth are related entities. Kiwi Wealth Limited is the issuer of the Kiwi Wealth KiwiSaver Scheme. The Product Disclosure Statement for the scheme can be located at kiwibank.co.nz. Kiwibank is only a distributor of the Scheme.

Keep going!
Waitomo’s glow worms have long been a drawcard for international tourists (Photo: Getty Images)
Waitomo’s glow worms have long been a drawcard for international tourists (Photo: Getty Images)

BusinessJune 3, 2020

Keeping the lights on: Can Waitomo and its worms survive a post-Covid world?

Waitomo’s glow worms have long been a drawcard for international tourists (Photo: Getty Images)
Waitomo’s glow worms have long been a drawcard for international tourists (Photo: Getty Images)

Waitomo is a town built on tourism. But as overseas visitors who have been flocking to its spectacular network of glow-worm caves for over a century dry up, the future looks uncertain.

More than 130 years ago, the eruption of Mount Tarawera killed an estimated 153 people and buried Te Otukapuarangi and Te Tarata, the world-famous pink and white terraces. It was a devastating blow to the families of those lost, and to the Māori settlements destroyed by pyroclastic surges and falling debris. One, Te Wairoa, remains as a tourist attraction; a reminder of the damage nature can wreak.

At the time, a trip from Europe to New Zealand could take three months. When the mountain erupted, there was no turning back for those who’d planned to spend half a year on a voyage to the eighth wonder of the world. Tourism operators needed to redirect the surges of wealthy pseudo-explorers looking for geological thrills, and eventually they found the perfect one: Waitomo.

The local hapū had known about the cave network, found between Te Kūiti and Ōtorohanga in the King Country, for centuries, using part of it as an urupā. It was Tāne Tinorau who first found the saw the jaw-dropping sight of glow worms amid netherworldly stalactite chambers and realised he had an opportunity on his hands. By 1889 he was leading tourists through the network; in 1989, Treaty land settlements returned the caves to his descendants.

A tourism brochure for Waitomo from 1928; and the Queen and Prince Philip visit the caves in 1954 (Photos: Jim Heimann Collection/Getty Images; PA Images via Getty Images)

These descendants, and other members of the Ruapuha Uekaha Hapū Trust, lease the caves to Tourism Holdings (THL) for operation. Last week, THL announced 140 job losses across the Waitomo Group and Kiwi Experience businesses, gutting the town’s income. This decision came after the devastating impact of Covid-19 on tourism in New Zealand.

“There are about 300-odd people living in the Waitomo area, and at least half of them are in some way involved in tourism, so [Covid-19] has seriously affected what goes on here,” said Angus Stubbs of The Legendary Blackwater Rafting Co. He spends large portions of his time in the Ruakuri caves, and knows them like the back of his hand.

Over the past couple of weekends Ruakuri has opened for limited tour groups. The narrow subterranean walk makes physical distancing difficult, so Stubbs and his fellow tour guides employ the “Covid hello” when they pass anyone: they turn and face the cave wall, shuffling past each other back to back.

When Ruakuri reopened two weeks ago, international tourists still made up many of the customers. There are 50,000 of them still in New Zealand post-lockdown, who stayed because they’d been unable, or unwilling, to get out. 

Waitomo tourism operator Angus Stubbs at Ruakuri Cave (Photo: Tourism New Zealand)

Stubbs, a geologist, estimates about 15% of the business is domestic tourism. “That’s what we’re reopening with,” he said. “Before lockdown, we had four pubs going off every night. You get two or three thousand people turning up each day.”

Some of these thousands were workers; in the caves, at adventure tourism business the Lost World, or in the bars and cafes of Waitomo, Ōtorohanga, and Te Kuiti. Stubbs said they were mostly young, and often on work visas. Although the wage subsidy had helped, many had left anyway. Some for their home countries, and others for kiwifruit orchards in the Bay of Plenty.

Those who left New Zealand did so quickly, sometimes with as little as four hours’ notice. “We have sheds full of people’s stuff [they left behind] here,” said Stubbs’s daughter, Pippin. “There’s even a car.”

These job losses will heavily impact the town’s raison d’être. THL chief executive Grant Webster said the business was operating at 5% capacity. The motels are largely vacant, and the pubs are closed. Waitomo’s economy is based on the ecology of the caves. “Our whole business in Waitomo is keeping glow worms alive. If they die, our children starve,” said Stubbs.

Piki Knap, interim manager of the Trust, said the company had a huge amount of sympathy for those affected by the job losses, many of whom were members of the hapū. “No-one in our lifetime has had to deal with a situation like this,” she said.

While the cost to those who run the caves is heavy, the job losses have an impact more than human; the caves rely on funding to stay in perfect condition.

Physical distancing ain’t easy underground (this is in 2011, well before the Covid era) (Photo: Lisa Wiltse/Corbis via Getty Images)

Waitomo is one of the most intense conservation projects in the country. The caves’ environmental team measures wind speed, wind direction and carbon dioxide levels constantly; even throughout lockdown. If too many people walk through breathing carbon dioxide, the stalactites in the caves could start dissolving. 

There are air-locked doors, humidified chambers, and environmentalists and entomologists hired explicitly to study the glow worms. “It’s all about our kaitiakitanga, right?” Stubbs said.

“We have to feed the glow worms, and to feed the glow worms we’ve got to have a healthy river, and to have a healthy river we plant riparian strips up, trap rats; the whole catchment is what we need to look after.”

Farmers – the only other source of income in the area – are also tied to the conservation project. The cave businesses and the Department of Conservation work together to fund the cave work, and so farmers nearby get funding and pairs of hands to plant along their riverbanks.

Lorraine Fox, a dairy farmer about 30 minutes’ drive north of Waitomo, has no caves on her property; but there is a river. “We have a river running through our property that is fully fenced, and drains are also fenced,” said Fox. “The riparian plants that we access are through Waikato Regional Council who offers them at a reduced rate for [cave water protection].”

It’s not uncommon for farms in the Waitomo and Ōtorohanga region to double as B&Bs for tourists and guest houses for cave guides. In the future, the farms themselves may become the area’s new drawcard.

Waitomo’s usual tourist spots sit deserted (Photos: Natalie Wilson)

Andy Rawles has worked at Huhu Cafe for 12 years, first as a chef and now as an owner. Huhu is well-known and well-loved in the area – even visited by Katy Perry at one point – but it was shut up until last Friday. 

They didn’t open for takeaways at level two because the general store was already open. “We didn’t want to be competing,” said Rawles. “There’s about 30 people that live in the village here.”

Thankfully, Rawles and his wife own a cafe in Te Kūiti, too, which gets more traffic. He’s been there almost every day. “It’s the first time [Huhu] has been shut for this long,” he said. “Those last few days were pretty grim. There wasn’t much point in being here.”

The last few years have been heavy with international tourism, but Rawles remembers a time when the domestic market was lucrative. “Eight years ago it would have been 70% locals,” he said. “But in the summer, now, it’s about 90% international.”

Like Stubbs, he’s seen staff naturally drop away. “We haven’t had any big talks about redundancies yet,” he said. The way he sees it, the easy bit is done; the bit with wage subsidies, the natural winter crew reduction, and the fact that everyone was in the same boat.

“I think it’s going to be harder decisions [moving forward],” he said. “[Recovery] will take until summertime, or longer.”

Andy Rawles prepares to open Huhu Cafe last Friday (Photo: Josie Adams)

An ash layer is visible towards the exit of Ruakuri, indicating an eruption around 1.2 million years ago. Moa bones are found on the banks of the cave river, washed in from outside. A sign is hammered into a rock 80 metres under the ground to warn us that by entering the Ghost Passage we’re trespassing into land owned by the Holden family. Over a pool of water in which Andy Serkis practised being Gollum, ancient stalactites dangle on the edge of shattering.

“The general feeling is that we’ve seen it all before,” said Stubbs. Most of our thought processes are short term, but in Waitomo there’s a grander scheme. Tāne Tinerau’s descendants, in their time guiding tourists through the caves, have seen swine flu, two world wars, and the polio epidemic.

“We have been here for hundreds of years and we will continue to be for hundreds more,” said Knap. “Our people are resilient, and we are confident we will get through this tough time.”

Just over 26,000 years ago, Lake Taupō was formed by the largest volcanic eruption in world history. The lava and debris killed animals and plants alike, and the ash travelled across international waters. Deep inside Ruakuri, the glow worms kept on shining. Protected by their limestone walls, the hapū, and geologists like Stubbs, they’ve weathered volcanic eruptions, economic recessions and pandemics. They will survive the tourist drought in Waitomo; whether anyone else does will take longer to know.

This story has been updated to include a statement from Piki Knap, interim trust manager of the Ruapuha Uekaha Hapū Trust.