Many first home buyers rely on their KiwiSaver balances to help fund their first house purchase.
A key need of first home buyers is certainty of the amount of funds on the day of settlement. However, KiwiSaver funds are not bank savings accounts – balances go up and can go down.
At the moment, global sharemarkets are experiencing the negative effects of the Covid-19 pandemic and the economic and trade fall out. As a result, some people’s KiwiSavers balances have gone down.
Your KiwiSaver account’s volatility, or the likelihood of the balance swinging up and down, in part depends on the type of KiwiSaver fund you have.
There are four general groups of KiwiSaver funds (and some mixed funds).
Cash and Conservative Funds have the least volatility when the market changes. These funds are more likely to invest mainly in cash and fixed interest investments (bonds).
Balanced and Growth Funds have a higher volatility due to having a higher percentage of growth assets such as shares and property. They are aiming for higher investment returns over a long period of time.
Typically, first home buyers are using all their financial resources (savings, bank debt and family support) to buy their first home. For this reason, many first-home buyers are said to have a ‘low risk capacity’ – that is they do not have the financial resources to easily make up a short term decline in the value of their KiwiSaver account.
Current Share Market (March 2020)
The current global share markets are likely to continue to be highly volatile due to the pandemic announcement, government responses and major trade and economic impacts. Markets may continue to drop significantly and may rebound e.g. as a reaction to positive government measures or good news about dropping infections rate or effective vaccines.
First home buyers – general advice
First-home buyers who are looking for surety of their KiwiSaver balances in the short-term ought to review their KiwiSaver fund to see if it matches their investment timeframe and goals.
Indicative KiwiSaver Funds and their typical investment profil
| Class of Fund | Suggested investment timeframe | Generally investing in.. |
| Cash | 1-12 months | 100% income assets |
| Conservative | 1-4 years | 80% income assets / 20% growth assets |
| Conservative-balanced | 5-9 years | 65% income assets / 35% growth assets |
| Balanced | 10-19 years | 50% income assets / 50% growth assets |
| Growth-balanced | 20-29 years | 35% income assets / 65% growth assets |
| Growth | 30+ years | 20% income assets / 80% growth assets |
The information in this table is generic and indicative only.
The information in this article is of a general nature and is not intended as personalised financial advice. We recommend speaking to a financial adviser before purchasing, changing or disposing of any financial products.
