Leverage up your KiwiSaver fund

David, in a recent SIFA presentation, you claimed that people aren’t taking enough risk in their KiwiSaver portfolios, and they should maybe have geared equities in there. What’s the reason for that?

David Beattie: A good place to start is in the scheme of KiwiSaver investors making good decisions for themselves, other than making sure they’re actually contributing an appropriate amount for the long-term. The most significant decision they can make is to be in the right type of fund. If you look at the demographics of all the people that are in KiwiSaver at the moment – and we’re able to have a look at those fairly objectively – it’s simply based on broad concepts of what people in different demographics should be in. On average, I think people are over-conservative. There’s a whole lot of reasons why that may well be the case.

Do you think more shares should be held for longer?

In general, I think KiwiSaver has been a fantastic product and a great opportunity for New Zealanders to save for their retirement in a very efficient vehicle structure which is well administered by the IRD. However, one of the slightly negative things about it is that it’s stopped short of the appropriate length of time that people should be thinking about, because there’s been this cut-off at 65. A lot of the life phases-type products are well intentioned in terms of recognising that a lot of people don’t really have a good handle on what sort of fund they would be in. At least let’s have a look at your age, and then wind you down as you hit that magical 65. People are under the assumption - which I think is a false one - that at age 65, they are literally going to take their money out, cash it up, put it in the bank and think of what they’re going to do with it.