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Thousands of KiwiSaver members who switched their investments into less risky funds when Covid-19 first hit still haven't switched back - and it could cost them hundreds of thousands of dollars.
There was a surge in switching from growth funds to conservative funds in March 2020, when … View moreThousands of KiwiSaver members who switched their investments into less risky funds when Covid-19 first hit still haven't switched back - and it could cost them hundreds of thousands of dollars.
There was a surge in switching from growth funds to conservative funds in March 2020, when sharemarkets around the world wobbled.
Westpac said it processed 18,140 requests to switch in that time.
Markets soon recovered, but 27%of those KiwiSaver members never switched back to more growth-focused assets, Westpac said.
Another 17% took more than a year to switch back and 12% switched back in between six to 12 months.
If an investor is investing for a long time - such as for retirement - growth funds often deliver better outcomes because they tend to have higher returns, although they are more volatile. Shifting from a growth fund when markets are weak can mean locking in losses.
Morningstar research shows that, as a group, conservative KiwiSaver funds have returned an average 4.1% a year over 10 years, compared to 8.2% for growth funds and 9.1% for aggressive.
Westpac projected that someone with $25,000 in KiwiSaver who switched from a growth fund to a conservative fund on March 20, 2020, would end up with $387,938 in 2054.
But if they had left their money in a growth fund, they would have $615,423 - boosting their final outcome by more than $225,000.
If they had shifted in March 2020 and then moved back a year later, they would have $588,955 in 2054.
Even over a shorter term, the impact can be seen. Someone who shifted on March 20, 2020 and left their money in a conservative fund would have $120,880 in 2034. If they shifted back after a year, they could have $145,693 and if they had not shifted, and stayed in growth, they would have $156,472.
That assumes that person is earning the median wage, getting a 3% pay rise a year, and making 3% KiwiSaver contributions matched by a 3% employer contribution.
Westpac head of KiwiSaver Nigel Jackson said the number of people who had not switched back highlighted the "education gap" for New Zealanders in relation to long-term saving and retirement.
"Being in the right fund is really important and being in the wrong fund will cost you money in the long term."
Westpac has now launched a new high-growth fund that will have 100% growth assets and Jackson said it would be important that investors understood the possibility for volatility, as well as the potential returns available, so that they could stick with it and not switch out at the wrong moment.
"It's one of those challenges, you can tell people it's going to happen but it's still a challenge for them when it does happen. It's critical they understand the possibility is there so they have the context. If they don't have the right information, that's the point of highest risk when they can lock in unrealised losses by transferring to lower-risk funds and experience that loss at retirement."
Westpac NZ general manager of product, sustainability and marketing Sarah Hearn agreed long-term investors who were not in the right fund would probably short-change themselves at retirement.
"The Covid-19 experience and more recent market fluctuations should serve as a reminder to regularly think about your investment goals, whether you're saving for retirement or a first home deposit. That includes checking you're in the right type of fund for you and your stage in life," she said.
"Market volatility is normal and expected. Those of us who aren't nearing retirement will see our balances affected by more economic peaks and troughs before we get there."
The latest Financial Markets Authority annual KiwiSaver report showed growth funds now represent 46% of total funds under management, with $51.4 billion invested, and a total of 1.53 million investors. This is more than double the $24.5b in 2021.
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Routine rental inspections can seem like an inconvenience. Every three months or so, tenants will need to worry about how clean the place they're renting needs to be to pass the grade. Is the landlord or property manager going to open the wardrobes and cupboards? Will I be forced to pay for … View moreRoutine rental inspections can seem like an inconvenience. Every three months or so, tenants will need to worry about how clean the place they're renting needs to be to pass the grade. Is the landlord or property manager going to open the wardrobes and cupboards? Will I be forced to pay for that worn-out carpet which was old anyway?
While these check-ups may feel annoying, they can help protect the tenant from unfair claims at the end of a tenancy, said Ray White business development manager Jessica Currie, who has 15 years of experience in Auckland property management.
On the other hand, Renters United spokesperson Zanian Steele said some landlords do not understand the laws and obligations, in particular "mum and dad landlords", or those renting out a granny flat.
Here's what you need to know about what the landlord or property manager can and can't ask of you:
What is expected at a rental inspection?
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At a property inspection, the landlord or property manager is checking if the place is reasonably clean and tidy, that there is no damage to the property, and any appliances and furnishings that come with the rental are working.
Property management company Crockers' senior team leader Renita Singh said ensuring the property is in a "good, tidy, clean" condition is enough.
Steele said a house doesn't need to be "hotel tidy" during routine inspections, because property managers need to have a realistic and reasonable expectation of someone living and using the house. For example, complaints about a few charred bits of pastry lying at the bottom of your oven or slightly dusty tabletops are not reasonable complaints, he said.
But the standards of being clean and tidy can be higher when leaving a property, he said.
Other unrealistic expectations would be to wash and iron curtains, for example, the Citizen's Advice Bureau said.
Landlords may photograph the property and refer to an inspection report they conducted at the start of a tenancy agreement to discuss any damage or issues that have come up. While they can photograph the rooms, they should not be taking photos of the tenants or personal items, where possible, unless those items are a breach of the tenancy agreement, the CAB said.
"When we take photos we try and avoid taking photos of personal belongings," Singh said. "But we do ask our tenants, 'we'll be coming there such and such day... we'll be taking photos of the interior of the property, if you want to remove anything, please do before we come'... but we do try and avoid taking photos of family photos and things like that."
A rental inspection is also a chance for the tenant to raise any issues or maintenance problems with the property manager.
How much notice should they be giving?
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Tenancy Services, which provides information to tenants and landlords on their rights and responsibilities, said inspections can happen between 8am and 7pm for rental properties, and between 8am and 6pm for boarding houses.
The maximum frequency for inspections is once every four weeks.
A tenant must be given at least 48 hours' notice before the inspection. With the appropriate notice given, the landlord is entitled to inspect the property when the tenant isn't at home.
Who is responsible for the gardens and the exterior?
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Ray White's Jessica Currie said gutter cleaning, exterior house washes and roof cleaning or maintenance are expected to be carried out at the cost of the landlord.
"In relation to the gardens, it depends on the tenancy, but generally speaking, tenants are responsible for lawns and gardens, but it's gardens within reason.
"If you've got substantial gardens... if there's a lot of hedges at a rental property, the tenants are not expected to trim those. It actually comes down to a landlord to maintain trees and hedging."
Crocker's Renita Singh agrees exterior cleaning, including decks, is generally the responsibility of the landlord.
"However, for example, tenants would be asked to clean the balconies or deck if it was caused by the tenant, so for example, if they had a barbecue out on the deck and the oil and grease has led to that, they will be asked to clean that."
Can they open cupboards and wardrobes? And why would they?
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Currie said they do open cupboards and wardrobes to check, for example, there are no leaks under kitchen sink or in bathroom cupboards.
"And same as like a wardrobe backed onto like a bathroom or something, you'd quite often open that door just to check there's no leaking through the wall or there's no dampness or any issues you need to be aware of. So that's the only reason why we do that. It's not to breach anyone's privacy. It's just to check that you know there's no issues with any leaking or any problems."
The CAB said it is reasonable for property managers or landlords to check the backs of cupboards or wardrobes for dampness, leaks or mould.
"It is less likely to be reasonable if they are just wanting to see what's in the cupboards.
"If it is a cupboard or wardrobe that contains the tenant's personal belongings it would be important to let them know in advance so they can choose whether to remove items or cover them up. This is about respecting the fact that while it may be the landlord's property, it is the tenant's home."
Do I have to get a professional clean done?
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The CAB said tenants do not have to do professional cleaning for a property inspection, even when their lease ends. But a landlord can deduct bond money for cleaning costs if, at the end of a lease, tenants don't leave it in a "reasonably clean" and tidy state and remove any rubbish.
Tenancy agreements may include a clause to say a tenant must pay for professional cleaning when they leave the property or that bond will be deducted for professional cleaning, but the CAB notes tenants do not have to pay this and the Tenancy Tribunal would not enforce it.
Importantly, this only applies if the tenancy agreement is under the Residential Tenancies Act. It could be void if you are flatting, in a private board or living in the same house as the landlord.
What is considered 'wear and tear'? Who should pay to repair?
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A tenant is not responsible for "fair wear and tear" to the property or any chattels provided by the landlord when they use them normally, Tenancy Services said.
Examples of what is usually considered fair wear and tear include a stove element wearing out from cooking, flooring getting worn, taps and washers wearing out or leaking, minor stains on carpets from you walking on it, and door handles and window latches breaking after normal use.
However, the tenant is responsible for any intentional or careless damage. Cases where the tenant may be held liable include abnormal use of the cooktop, such as for heating the kitchen, burn marks or stains on carpet, and drawings on wallpaper.
For more details on the cost of repairs, see the Tenancy Service's website.
My landlord and I can't agree on 'fair wear and tear' or cleanliness - what do I do?
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Renters United's Zanian Steele said understanding your rights, the law and having conversations with your property manager or landlord are important.
In addition, tenants should take note of the age of the chattels provided by landlords when they move into a house, so they can raise their concerns if they appear to need replacement, he said.
Currie said it is important for tenants to email the landlord or property manager as soon as they notice any issues about the property, with photos, instead of waiting for months between inspections.
"If nothing is actioned and further damage occurs, like you just keep noting it down with photos and continue to send it through, because at the end of the day, as a tenant, you need to provide evidence that when you noticed the damage you've actually reported it.
"If they [landlord] don't choose to action it immediately, and then it gets worse, well then the tenant can say, 'well, I told you three months ago on this day and time, here's the photos, here's an email of what was happening'."
If talking to your property manager and landlord does not resolve any dispute you have, you can try seeking advice from the Citizens Advice Bureau or apply to the Tenancy Tribunal.
My landlord never does inspections, should I be worried?
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Yes, it does raise risks, Currie said. As annoying as routine rental inspections can be, they can also protect tenants from any unfair claims.
"If the tenant has been living there for three years and the owner hasn't been through during that time then he comes back three years and said 'well, now this is a problem', you know, it's not fair on the tenant.
"Over a period of time, like fair wear and tear does happen, depreciation on chattels and things occurs, and we have seen instances where private landlords have gone through after a tenancy and tried to claim everything back off the tenants, which is actually not things that they'd be liable for at all."
Routine inspections also fulfil a requirement of most house insurance policies, she said.
"Most insurance policies state you have to do routine inspections every three months. There are a couple of insurance policies that state once every six months but majority, it's every three months you should be going to your property to do an inspection and taking photos as well."
The CAB agrees that regular inspections allow landlords to see the realities of wear and tear over time, so that there are no surprises at the end of the tenancy.
Singh said routine inspections can also pick up on issues that the tenants might have missed, too.
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At rae, we specialize in face sculpting, a non-invasive and holistic facial massage that offers incredible beauty and emotional … View moreHave you ever heard of face sculpting, manual lymphatic drainage, or buccal massage? If you’re curious about these rejuvenating techniques, you’re in for a treat!
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