Thu, 01 Jul 2010
TOWER’s default fund – what is it?
TOWER is one of only six default KiwiSaver scheme providers.
As such, we have a default investment product (“default fund”), where many of our members currently have their investments. People who are automatically enrolled in KiwiSaver through their workplace and choose not to opt out may be allocated at random by the IRD to TOWER’s default fund, the TOWER KiwiSaver Cash Enhanced Fund.
A conservative investment mix
The Ministry of Economic Development (MED) sets the guidelines for the kinds of investments that default KiwiSaver funds can make. Currently the MED requires that such funds must be conservative in their investment mix to minimise risk of members losing value in their investment.
As a consequence, TOWER’s default fund has around 80% of its investments held in lower risk income assets - mainly cash and fixed interest - that do not normally pose as much risk of a substantial fall in value as other more aggressive investments. The remaining 20% of the fund is invested into higher risk growth assets - shares and property - to try and keep fund returns ahead of inflation.
The investment mix of TOWER’s default fund, dominated by income assets but enhanced by growth assets, is why we call it the TOWER KiwiSaver Cash Enhanced Fund.
TOWER’s default fund does not try to make large investment returns, but instead seeks to preserve members’ investments and maintain modest growth. The conservative nature of the fund is clearly reflected in its investment objective, which is to achieve a return which is 0.75% above the NZX 90-Day Bank Bill Gross Return Index.
In effect, the objective is a return slightly higher than you could usually get from a short-term bank deposit.
More information in respect of the investment portfolio of TOWER’s default fund in the monthly fund fact sheet published on the TOWER website.
Should I change funds?
As noted in our accompanying article - Are you in the right TOWER KiwiSaver Scheme fund?- investors with a long retirement saving period ahead of them may benefit from switching to a fund that is more aggressive than a KiwiSaver default fund.
If you wish, you can switch out of TOWER’s default fund and into a TOWER KiwiSaver Scheme fund more suited to your specific circumstances. This can be completed online!
Simply log in or register for online access to your member account by clicking on the Check My Balance link in the upper right hand corner of the TOWER KiwiSaver Scheme Quarterly newsletter. Remember you’ll need your TOWER KiwiSaver Scheme membership number to register.
Best of all - it costs you nothing to switch between TOWER KiwiSaver Scheme funds online. It’s just another advantage of being with TOWER.
For further information on switching between TOWER KiwiSaver Scheme funds, please read the article Are you in the right TOWER KiwiSaver Scheme fund?, email investments@tower.co.nz or call 0800 379 372.
For a copy of the TOWER KiwiSaver Scheme Investment Statement, click here.