[ad_1]
The economic crisis and the environment of ever lower interest rates have led people to make a series of sometimes contradictory financial decisions, according to new data from KiwiSaver.
While a large portion of KiwiSaver investors panicked when equity markets crashed in March and switched to more conservative funds, those eager to enter the real estate market for the first time did not stop.
First-time home buyers see an opportunity
The value of KiwiSaver withdrawals by first-time home buyers increased by 25% in financial year 2020.
First-time home buyers withdrew $ 1.2 billion in the year through March 31, according to the Financial Markets Authority (FMA). KiwiSaver annual report released Thursday.
This was equivalent to 1.9% of the $ 62 billion of KiwiSaver funds managed as of March 31, a slightly higher percentage than 1.7% the previous year.
Most updated Finance data shows that there was an increase in withdrawals in March 2020, a drop in April and May, and then a recovery in June, July and August.
KiwiSaver Withdrawal Data Matches bank loan data showing first-time home buyers playing an increasingly active role in the housing market.
They accounted for a near-record 19.8% of new home loans in August, helping the value of home loans overall hit a record in August.
‘Invert 101’ ignored
Elsewhere, the FMA’s KiwiSaver report shows that the emergence of Covid-19 sparked knee-jerk reactions from a relatively high number of KiwiSaver investors.
Investors exchanged $ 7.7 billion of assets between KiwiSaver funds in the year through March 31, more than double the amount in the prior year.
Of the $ 62 billion in KiwiSaver funds under management, 12% were switched between funds. In 2019, this portion stood at 6%.
The total value of assets in conservative funds, cash and fixed interest increased $ 1.5 billion in the year to March, while the total value of assets in growth funds, balance sheet and stocks decreased by the same amount.
FMA Director of Regulation Liam Mason said this level of change shows that there is still a lot of work to be done to prevent people from using their retirement savings to try to synchronize the market.
“If the market goes down and you sell, and then the market goes back up and you buy again, you’ve just locked in all those losses. And I think that could be the story for some, ”he said.
While the FMA does not yet have data for the months after March, Mason said anecdotal evidence suggests that people started switching to higher risk funds relatively quickly.
In fact, retail investors from around the world flocked into the stock market during this time.
Mason said the FMA was wary of how the low interest rate environment was affecting investor behavior. I was particularly concerned about that from the perspective of those in search of performance who might be scammed (outside of KiwiSaver).
Regarding the high level of KiwiSaver switches, Mason recognized that the ease of being able to do it online was a contributing factor.
On the other hand, he pointed out that technology makes it easier for suppliers to reach their customers; in some cases, leading them to consider their risk profiles, as well as the risk of blocking losses when switching funds.
Withdrawals for moderate financial difficulties
For KiwiSaver Hardship Withdrawals, Inland Revenue figures show that 1600-2100 people made such withdrawals each month between March and August. This was only slightly more than pre-Covid levels.
However, the value of these withdrawals increased more significantly from around $ 9 million per month before Covid to around $ 13 million per month between March and August.
