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Investment markets   

The investment markets over the September quarter continued the pattern of returns observed in the June quarter. The value of shares generally went down and the returns from cash and bonds were positive. Members with an exposure to shares will therefore have seen a second quarter where their overall return was negative. In contrast, members with a focus on bonds will have seen positive returns. The good returns from bonds stem from the fall in interest rates. Members must remember that with the fall in interest rates, future income returns from bonds will be lower. Government bond yields are now lower than dividends from shares.

While part of the reason for the sharemarket downturn was the global economic outlook and a potential recession, a significant part appears to be due to the uncertainty surrounding what will happen in Europe. While the focus is on the debt problems of Greece (and Ireland, Portugal and Spain and even Italy and France), in reality, the uncertainty is a combination of the debt levels, fiscal deficits and the welfare systems, and the solvency of the banks. It is why the money was borrowed that is the real problem. Generally, until Europe addresses the root cause, we expect that the markets will be volatile. We do not know whether the sharemarkets will go down further, or whether they have reached the bottom. This is because the downturn is due in part to political uncertainty not economic uncertainty. However, even if the Euro does not survive the Greek experience, the world will not end and companies will still make profits. Remember shares should only be bought if members can wait, and will wait, 10 to 12 years before they intend to spend the money.

Investment seminars 

The final seminars for the year are in Auckland on the 6th and 7th November. The seminar’s education focus is on how to “convert your capital into income in retirement” and includes a general investment market update. Details are on www.SuperLife.co.nz under “Seminars”. The seminars are free and you can bring a friend or a family member. We are currently finalising the seminars for 2012. These will adopt the same format with the educational aspect focused on managing risks.

   SuperLife = education + empowerment 

Name change

In September, we changed the name of our KiwiSaver scheme from “SuperLife KiwiSaver” to “SuperLife” to comply with the Inland Revenue’s requirements and to get a consistent brand across our schemes.

  SuperLife = Superannuation + KiwiSaver 

Adminstration fees 

Currently, over 37,000 New Zealanders trust SuperLife with their superannuation and/or KiwiSaver needs. SuperLife’s philosophy is to deliver value to its members. Recently, SuperLife Limited has undertaken a review of its administration fees for its SuperLife superannuation scheme. The new fees will apply from 1 April 2012. Attached is a summary of the new fee scale. Overall, the total fee income to SuperLife Limited will reduce and members will see a reduction in the fees deducted from their accounts or added to their insurance premiums. SuperLife has a single-minded focus; to make available what we consider to be the best superannuation and KiwiSaver vehicle. We focus on simplicity, flexibility, security and value. We believe that if we provide clear and simple information on investment and insurance options, our members can make informed decisions on what is best for their circumstances. By keeping fees low, it means that more of the returns are available for members. We want our returns to be explainable and transparent; we recognise that the only return that matters is the net-of-tax and net-of-fees return. 

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Thinking about retirement 

SuperLife has published a guide “thinking about retirement”. The guide discusses the financial aspects of retirement and follows on from the 2011 investment seminars about “how to turn your investment into income in retirement”. If you are within 5 years of retirement, this is a must read. Email SuperLife for a copy. 

After tax returns

>> View the latest after-tax returns. 

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Administration fee basis

From 1 April 2012, the administration costs under SuperLife’s superannuation scheme fees will change. Current administration fees The current administration fees charged by SuperLife are a combination of fixed dollar amounts and a percentage of assets. The fixed dollar amounts vary by member based on size and complexity of their arrangements and range between $50 and $170 net a year. The asset based fee is 0.12% p.a. of assets, made up of what is called a “trustee” fee of 0.1% p.a. and “in-fund” costs of 0.02% p.a.. In contrast, our KiwiSaver scheme has a lower dollar fee ($33 for all) and a slightly higher asset fee (0.2% p.a.). From 1 April 2012 From 1 April 2012, SuperLife will standardise the fee scale to bring the fees of the superannuation scheme and KiwiSaver scheme into line. The percentage of asset fees will also, in the future, be described as an administration fee. The administration fees will become:

The current general “trustee fee” will be removed. Under current and proposed legislation, KiwiSaver schemes and superannuation schemes will be moving to a licensed-trustee regime. We expect that compliance with the new regime will introduce new costs. Actual trustee compliance costs in respect of this new regime (if any) will be deducted from the fund returns.

Investment management fees

There are no changes to the investment management fees basis. The current basis where the fees are charged by the managers (and agreed between the trustee and the managers) continue to apply.

Overall, the changes represent a small reduction in the current total fee income to SuperLife. However, because the mix of the fixed dollar and percentage of assets fees is altered, the changes to the fees affect each member differently. Some members will pay more overall and some less, depending on the level of their savings account balances. Each member will however see a reduction in the fixed dollar fee deducted from their accounts. The total fees remain very competitive.

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"My future strategy"

If I reviewed my investment strategy (i.e. asset mix) today and was concerned mainly with performance over the next 2 - 3 years, I would be thinking about:

• keeping my cash down to the lowest level I felt comfortable with.
• holding more bonds than normal and favouring non-government bonds over government bonds. Yields of investment grade corporate bonds are higher than cash rates and are locked in for a longer period.
• favouring Australian and NZ shares over overseas shares to benefit from the higher dividends of these markets. In addition, to gain an exposure to the expected growth in the Asian economies.
• building an exposure to emerging markets to about 20% of the overall share exposure.
• maintaining the currency hedge on my overseas shares above my neutral position.
• beginning to rebuild the exposure in the property sector.  This would be the start of a slow build up back towards a neutral weight.

The above strategy does not take into account an individual’s personal situation. Also, as with all investment decisions, what might be the right strategy over the medium term, may not be right over the very short-term. We really don’t know what will happen over the short-term.

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