How Kiwisaver can help bridge the gap between pensions and the cost of living

16 Dec 2021

Retirement expenses have risen again in 2021! How much do you need if you retire? What should you do if the pension is not enough?

YG Financial Services shares with you how to choose KiwiSaver products correctly to prepare for retirement.

  1. How much money do I need to prepare to be comfortable later on?

For most people this issue is given little thought, with more urgent matters such as rent payment and mortgage repayments taking centre stage. And with New Zealand being a welfare state, many people will respond by simply asking if they can not just receive a pension after retirement. But the gap between our imagination and reality is no small matter.


Image source: pixabay


The newly released “New Zealand 2021 Retirement Expenditure Guide” shows that if a couple wants to enjoy a comfortable retirement life in a large city in New Zealand, they need to prepare a deposit of more than $809,000. If you are outside a big city, you need $511,000.

Let’s take a look at how much it will cost per week.

YG Financial Services has collated and tabulated the above information from The 2021 New Zealand Retirement Expenditure Guidelines released by Massey University. Perhaps these numbers will not have much of an effect on you when you first read them. You may also be thinking; but won’t there be a pension after retirement?


  1. Can I enjoy my retirement life if I have a pension?

A pension plan (New Zealand Superannuation) is paid by the New Zealand government. Generally speaking, citizens or residents need to have physically lived in New Zealand for a certain number of years to qualify to receive a pension from the New Zealand government at the age of 65. The latest policy is that a person needs to have lived in New Zealand for 20 years, of which 5 years of residence must be after the age of 50.

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How much is this pension?

The following data is current as of July 1, 2021, according to Work and Income New Zealand (WINZ),

Now, when we put the weekly expenses together with the weekly pension, you can immediately notice the difference between the two.

Can you see just how big the gap is between the pension and the actual cost of living?

Image source: Pixabay


So how do we make up for this gap?

Obviously the government is also aware of this issue, so as early as 2007, it launched KiwiSaver: a voluntary, self-financing, long-term financial management product for New Zealanders.

YG Financial Services looked in detail at Kiwisaver’s benefits, operation method and fund types in a previous article titled: “Last Three Days! Have you received this government subsidy? Hundreds of thousands of New Zealanders have missed it!” Get in touch if you would like to have a read of this.


  1. KiwiSaver calculator

What everyone is most concerned about is how to fill the pension gap with appropriate funds when you retire. YG Financial Services recommends a free online tool, KiwiSaver calculator, for everyone.

Using the KiwiSaver calculator, by selecting your age, annual salary, type of fund, etc., you can easily calculate how much KiwiSaver can earn by the time you retire at the age of 65.

For example, a 30-year-old person with an annual salary of $55,000, contributing 3% of his salary to KiwiSaver having chosen an aggressive fund, can receive $243,027 by the age of 65. (See below)

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  1. How to choose a KiwiSaver service provider and fund type

In the previously mentioned article about KiwiSaver, we introduced a total of 30 KiwiSaver providers, 6 of which are the default providers (data as of December 2021). These 6 are Bank of New Zealand (BNZ), Booster, BT Funds Management (Westpac), Kiwi Wealth, Simplicity and Smartshares. In addition, there are currently five types of KiwiSaver funds: defensive, conservative, balanced, growth and aggressive.

The current default means that if KiwiSaver users do not specify a preferred provider themselves, the government will randomly assign users to these default operators and choose the default fund type, which is currently a “balanced” fund type. If you want to choose a fund type with higher risks and returns, you need to choose a provider yourself.

With so many fund types and so many service providers, how should we choose? To do so, in fact, we only need to grasp three main points: cost, service, and return.

1) Cost

Currently KiwiSaver’s fees are divided into two categories: fixed fees and variable fees.

The fixed fee is the annual membership fee, ranging from $0-60, and the average fee is $32 a year.

Floating fees are charged as a certain percentage of the account balance, which means that the higher your balance, the higher the proportional fee will be. The fee also rises in relation to the fund type: the higher the risk, the higher the proportional fee.

2) Service

This refers to the range of services provided by the KiwiSaver service providers to users: such as investment selection services, communication services with members, and other services. Whether the KiwiSaver provider’s online management interface is convenient and easy to operate is also a criterion for consideration.

3) Risks and rewards

Generally speaking, KiwiSaver’s fund types include defensive, conservative, balanced, growth, and aggressive, with increasing risks and, relatively speaking, increasing returns.

However, even if they operate the same type of funds, different operators have different rates of return due to different operating capabilities. New Zealand’s rate of return is calculated based on the volatility of the investment portfolio’s yield over the past 5 years.

With the above three criteria, we can use an online evaluation tool called fundfinder to help us find the type of fund we want. For example, by using this tool we can immediately view the respective fees, services and returns of 81 radical funds provided by 30 different service providers if we want to compare service providers. You can find “fundfinder” here:


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Want to know how much money you need to fill the pension gap when you retire?

Want to know how to choose the most suitable type of KiwiSaver fund for you?

Have any questions about KiwiSaver products?

Come and have a chat with YG Financial Services!

Contact us

Address: Unit 6, 33-35 Apollo Dr, Rosedale, Auckland 0632
Tel: 027 4321 454 (Yang Gu)
021 998 699 (Joanna Zhang)


Need some advice but not sure where to start?

Contact us today for a no-strings, free 30-minute consultation.

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