Koinonia
kiwisaver scheme
Phone: (04) 473 9369
PO Box 12-287
WELLINGTON 6144
Freephone: 0508 RETIRE (738 473)
www.koinonia.org.nz
Email: [email protected]
The Ethically invested KiwiSaver Scheme for Christians
May 2016
Prepared by The New Zealand Anglican Church Pension Board.
Taking a stand on climate change
In my March newsletter message, I outlined our ethical investment policy; a policy which differentiates Koinonia from
myriad other KiwiSaver Schemes on the market. I also hinted that we would reveal some exciting news about leadership
we are taking with our energy portfolio to reflect a low carbon economy.
We have now implemented a policy for our fossil fuel investments. Unlike tobacco, munitions and other sectors, which
we currently screen out of our portfolios, to divest of fossil fuel stocks in their entirety, while easy to do, would expose
the portfolio to excessive risk (simply because energy stocks form a significant part of global stock indices). So we have
taken a more nuanced approach. Firstly, we have ensured our portfolios are free of investments in coal and tar sands
(the really damaging industries). Secondly, we have subscribed to data which ranks all our remaining energy stocks on
a broad range of corporate responsibility criteria including each organisation’s environmental and climate protection
policies. We have adjusted our portfolio so that we have more of the stocks that rank well and less of the ones that
rank poorly. Finally, we have aligned ourselves with a large UK based Church investor group so that we can advocate
more effectively on climate change issues directly with large corporates. Our ground breaking policy has received a lot
of interest – including as far away as the Anglican Church in Canada!
Through all of this, I’ve learned there is no such thing as a ‘one size fits all’ definition of ‘ethical’. All of us have our
perspectives – and they are neither right nor wrong. Our approach has been to think in terms of what we perceive to
be widely held Christian values. I’d welcome any feedback you have on our policy statement, which you can find
here or email me directly on [email protected].
Blessings
Mark Wilcox
General Manager
Investment Performance
Investment returns at 31 March 2016, after expenses and before tax.
Income Fund
Balanced Fund
Growth Fund
3 months
2.09%
1.33%
0.34%
1 year (p.a.)
4.07%
4.93%
5.29%
3 years (p.a.)
4.65%
7.81%
9.43%
Investment performance cont.
investment Commentary
Positive returns have been achieved by all our Funds over the various reporting periods. Also as expected higher risk
Funds out performed low risk Funds in the 1 year and 3 years (annualised return) periods.
However, counter-intuitively, the lower risk Income Fund did better than the higher risk Funds in the March 2016
quarter. This irregularity reflected the significant movements that occurred in both the underlying equity and bond
markets during the quarter.
At the beginning of 2016 concerns around global growth gripped the markets as factors including the uncertainty
surrounding China, falling commodity prices and central banks were reflected in prices. However, sentiment shifted
sharply in the latter half of the quarter on the back of better economic data and some calming words and actions from
central banks (i.e. these led to an easing in concerns).
These large, and sometimes unpredictable, movements are why diversification is recommended. At times of heightened
uncertainty income assets may be sought for their perceived stable income like returns (albeit low returns are expected
from these assets at present).
Our strategy is to remain active and selectively cautious, but diversified, in the current and expected future
investment environment.
What are Member Tax Credits?
You may be eligible to receive money from the Government into your account. This payment is called a Member Tax
Credit (MTC). It has nothing to do with taxes, except that it is paid by Inland Revenue. It can be looked upon as a Bonus
Contribution or a Government Contribution. Either is a better name than Member Tax Credit!
The Government will make an annual contribution into your KiwiSaver account as long as you:
•
have contributed to your KiwiSaver account during the year (either by regular or lump sum payments);
•
are aged between 18 and 65 (although it can extend beyond 65 if you have not been in KiwiSaver for 5 years; in
which case it ceases after 5 years membership); and
•
were resident in New Zealand.
The Government pays 50c for every $1 you pay in, but there is a limit. To get the maximum amount of $521.43 from
the Government, you need to pay at least $1,042.86 each year. This equates to $20 a week.
In the year you join KiwiSaver, you will recieve a MTC payment based on the number of days in the year you have been
a member (rather than on the full year).
If you have a job, money will be taken from your pay automatically by your employer and sent to Inland Revenue, who
will then send it to us. In other cases, you can pay directly to us.
You can “top up” your contributions by voluntary payments, so you get the maximum MTC amount. Remember, the
more you pay, the more you get from the Government (up to the above maximum).
We claim the MTC on your behalf after 1 July each year. You don’t have to do anything.
Your MTC does not count as taxable income.
You can check how much you need to deposit in order to receive the maximum MTC by logging into the member
section on the Koinonia website or by contacting us. Also remember that it can take Inland Revenue up to three months
to process and forward your contributions to us. However, those contributions “in the system” will still count towards
your MTC entitlement.
Retirement: More to it than you may think
The primary purpose of the KiwiSaver regime is to help you with your long term saving for retirement. However,
reaching retirement is not the end of the story. You will want your KiwiSaver savings (and any other investments) to
continue to work for you during your “retirement years”. That is why one of the features of Koinonia is the ability to
leave some or all of your savings in your account post 65 and take partial drawdowns as and when you need them.
The primary purpose of the KiwiSaver regime is to help you with your long term saving for retirement. However,
reaching retirement is not the end of the story. You will want your KiwiSaver savings (and any other investments) to
continue to work for you during your “retirement years”. That is why one of the features of Koinonia is the ability to
leave some or all of your savings in your account post 65 and take partial drawdowns as and when you need them.
Common questions are “how much will I need to have at retirement?” and “how long will my money last?”. Unfortunately
there is no magic number to answer these questions. Everyone’s retirement needs are different. There are a number
of factors that can influence the answer. Some of these factors are:
•
When will you retire?
•
How many years will you have in retirement?
•
What sort of lifestyle do you want in retirement?
•
What will be the impact of future earning rates on my savings?
•
How much can I “safely” drawdown from my savings?
Some of these you have some control over and some you won’t. Over the next few newsletters we will discuss each
of these factors.
Factor One: Retirement age
When to retire is usually a personal choice. It is something that you can have reasonable control over, although there
can be circumstances beyond your control which cause you to stop working early than you planned (e.g. redundancy,
health issues). It is a decision laden with personal, emotional and financial considerations.
There is no set “retirement age” in New Zealand. New Zealand Superannuation is paid from age 65, but you don’t have
to stop working to get it. These days, more and more people are staying in employment beyond 65 either full-time or
part-time.
You don’t have to stop contributing to Koinonia once you reach age 65 or when you do retire. As long as you have not
closed your account (by full withdrawal) you can continue to contribute by regular and/or lump sum payments. Many
members do this.
Factor Two: Years In Retirement
We are told we are living longer these days. On average, 65 year old men today can now expect to live until they are
86, and 65 year old women until they are 88. Put another way, your retirement years (or your “spending years”) could
be half or more of the length of time of your working years (or your “accumulating years”). So if you plan to retire at
65, you should have a plan that will provide the income we want for 20 years or more.
There will be different calls on your income and savings over those years. The Commission for Financial Capability
identify three stages of retirement:
1. The Discovery Stage (65 – 74): This first stage of retirement will, for many, be the “doing” years. The time to have
a go at all the things you’ve said you’d get around to someday.
2. The Endeavour Stage (75 – 84): The middle years of retirement may be more about consolidation, a time to choose
fun things, develop old skills, explore fresh talents and grow new friendships.
3. The Reflection Stage (85 plus): As this third stage is a time when health and finances may limit choice, it’s a time
to accept help graciously, to make the most of all those memories and to keep up with old friends because you
hold each other’s history.
In the Discovery stage lifestyle drives spending, then in the Endeavour stage spending slows as you slow down a bit. In
the Reflection stage spending may go up due to increased costs relating to health and well-being. The challenge is to
preserve enough of your resources to have an income to support you in the late stage of retirement.