Most if not all of us work with retirement in mind or at least think about it periodically. The aim of the game is to build a nest egg to afford us a comfortable lifestyle in the later years of life. KiwiSaver is one of the mechanisms that more and more Kiwis are invested in to secure their retirements and of course New Zealand Superannuation (NZ Super). How much you have available come 65 depends on a number of factors such as your contributions, type of fund and so on (it would be a good idea to speak to a certified financial adviser for s solution that could work best for you). There are a number of avenues through which people can build retirement nest eggs. One of them is AMP’s New Zealand Retirement Trust (NZRT).
What is The New Zealand Retirement Trust (NZRT)
NZRT is an employer-sponsored saving scheme where your employers make contributions towards your retirement pretty much the same that they would with KiwiSaver. You make contributions to your member account and your employer makes contributions to your account too. Contributions are managed by investment professionals who work to maximise returns on investment.
I’m lucky enough to work for a company (we’ll call it XYX for the purposes of this post) that offers NZRT as well as KiwiSaver. XYX employees become eligible to enrol from their second year of service. If you aren’t enrolled in KiwiSaver, but wish to enrol in NZRT, the employer makes contributions at a rate of 8% of annual earnings. If enrolled in KiwiSaver like I am, and you would like to enrol in NZRT too, they do offer that option. In this instance, contributions are split with 3% going to KiwiSaver and 5% going to NZRT.
Note: This may vary from company to company. The percentage contributions stated above are those offered by my current employer and may vary amongst companies that offer NZRT.
AMP offers a range of options into which funds can be invested. These include Diversified funds, Goal-based funds and Single Sector funds within which are 27 investment options. These include but aren’t limited to:
- AMP Aggressive Fund
- AMP Growth Fund
- AMP Balanced Fund
- AMP Moderate Balanced Fund
- AMP Moderate Fund
- AMP Conservative Fund
- AMP Global Multi-Asset Fund
- AMP Income Generator Fund
- AMP Cash Fund
- AMP New Zealand Fixed Interest Fund
- AMP International Fixed Interest Fund
- AMP Australasian Shares Fund
- AMP International Shares Fund
- AMP Passive International Shares Fund
- AMP Property Fund
In the case of my investment, 100% of XYZ’s contributions are invested into the AMP Conservative Fund. This is a default set by them and cannot be changed. I have full reign over my member contributions and can invest them into one or more of the available funds. I have mine spread across a couple of different options.
NZRT fees
As this is a managed investment option, it does come with fees which in some cases can be quite up there. The fees vary depending on what funds you are invested in. As a start, there is an annual member fee which at the time of writing is $107.52. Other fees charged include, an investment management fee, service fee, administration fee and other costs and expenses. The fees vary from fund to fund and finer details can be found in the New Zealand Retirement Trust Product Disclosure Statement.
For example, in the case of the AMP Conservative Fund, the fees are as follows:
- Investment management fee – 0.35%
- Administration fee – 1.4925%
- Service fee – 0.80%
- Costs and expenses (estimated) – 0.19%
- Total annual fund charges (estimated % of net asset value) – 2.83%
In my case, some of the fees are covered by XYZ which is a win because to be honest, who likes paying fees? And, depending of how much you are paying in fees, it could have a significant impact on returns down the line. A couple of percent or so now may not sound like much but over time, it all adds up.
What happens to NZRT when you leave your employer
As already mentioned, this is an employer-sponsored savings scheme and thus such, doesn’t have the same restrictions such as with KiwiSaver. The biggest one is that the funds are NOT ‘locked in’ so to speak until you retire. When you leave your employer, AMP transfers your membership to My Super. My Super is an NZRT personal plan that works along the same lines as the employer-sponsored scheme. You can make regular or one-off contributions towards your savings and you have access to the savings whenever you like.
If you don’t want to continue with NZRT, you have the option of taking all your money out and doing with it whatever you please.
You are also entitled to employer contributions provided you leave employment in good standing. If you are dismissed for serious misconduct or resign to avoid such, there is no entitlement. The amount that you get from the employer account is also dependent on your complete years of service. In my case, the entitlements are as follows 1 year – 20% of employer account, 2 years – 40%, 3 years – 60%, 4 years – 80%, 5 years – 100%.
Why join NZRT?
A big and really simple reason to join NZRT is, INVESTING IN THE FUTURE! When you factor in employer contributions which is pretty much FREE MONEY, it is a win-win situation.
I have been enrolled for 5 or so years and the balance has grown to a considerable amount. Without going into the details of how much it is currently worth, it is above the 2019 average KiwiSaver member balance of $19,426 but below The average NZRT member balance of $84,343.29. It isn’t bad for a regular contribution that doesn’t break the bank and one that doesn’t cross my mind. I just get on with life.
It is different to KiwiSaver in that, funds are not ‘locked in’, so to speak, until you reach retirement age. As mentioned above, when you leave your employer, even if it is well before retirement age, you can do whatever you like with the contributions.
As far as returns go, these will vary depending on what funds contributions are invested in. Take the Conservative Fund for example, from 2011 through to 2020, the average annual return was 3.58% (after deductions for charges and tax). This is more than what you would get for money sitting in a savings account or term deposit. When invested in other funds, the potential returns could be a lot higher. You would have to do some homework to figure out what fund works best for you.
What bemuses me is how so many of my colleagues have chosen not to join the scheme. Some see it a waste of time and money. Others see it as XYZ finding an excuse to not pay you everything that you are owed come payday. Groupthink has gotten into many of them and they see it as the XYZ screwing them over (actual words spoken) with their pay. Then there are the few that don’t believe in KiwiSaver or anything that resembles it. someone told them that schemes like them FAIL and they will lose all their money. To the non-KiwiSaver believers, everyday banking and savings account are the way to go. If only they could have a good think about it and realise the potential! But hey, each to their own right?
I on the other hand am a believer of it. Admittedly so, I didn’t sign up when I became eligible but I really should have; as they say, hindsight is 20/20. It took me a couple of years or so to get there but I’m glad I did get there.
So, if you were to ask me if you should join NZRT, my answer would be a very quick, YES!
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