Helen Twose: It pays to keep an eye on account details

All these figures are important to take the time to digest, in the same way as you should study your bank account statements closely. Photo / Thinkstock

Opinion

My New Year's resolution was to really get on top of my financial affairs. I'm the first to admit I'm pretty lousy with money but I have been in KiwiSaver for a while and am happy to see that balance creeping up. Here's the thing: when letters arrive from my provider I really don't take a good look at them (other than the total). Honestly, I wouldn't know what to look for anyway. So what are the important figures on those statements and how do I know if I could be getting a better return with another crowd?

KiwiSaver scheme providers send members various communications throughout the course of a year. Reading the combination of all these communications will help you better understand your investment in KiwiSaver.

Some of these communications, such as newsletters and annual reports, are general in nature and have more to do with encouraging financial literacy and educating members about KiwiSaver and investing.

Others, such as member transaction and tax statements, include financial information relating specifically to your account and that's where the numbers you refer to crop up.

Member transaction statements are usually sent annually and are very important documents to read thoroughly beyond simply checking your account balance.

Apart from your opening and closing balance, these statements include the contributions you, your employer and the government have paid, as well as any fees, tax, and permitted withdrawals deducted during the period reported on.

The earnings (or loss) your investment has made over the period may also be detailed, and in some cases the performance of your KiwiSaver fund overall may be included.

All these figures are important to take the time to digest, in the same way as you should study your bank account statements closely, but realistically they do not tell you whether you could gain better returns from another KiwiSaver provider.

To find out how your KiwiSaver fund is doing versus alternatives, you'd need to compare performances reported by different KiwiSaver scheme providers.

Most KiwiSaver scheme providers publish their funds' returns over various time periods on their websites and update this information monthly.

There are also websites and publications (including the Herald) that compare returns of KiwiSaver funds offered by different providers.

However, interpreting the performance of your KiwiSaver fund compared with other providers' funds isn't always simple, and it can happen that apples aren't being compared with apples.

For example, you'd need to be certain that you're comparing KiwiSaver funds that have risk profiles similar to the one you're invested in.

A KiwiSaver fund that looks attractive because its returns are better than the one you're in might not have a risk profile that closely matches your own risk tolerance as an investor.

It's important to remember that past performance is not a reliable guide to future returns for KiwiSaver funds, and so trying to pick winners from historical data is not necessarily going to maximise your investment returns.

There are many other variables that contribute to KiwiSaver fund performance, not least the mix of the fund's underlying assets, the way in which the fund is managed, and market conditions during the period in question.

KiwiSaver investments tend to be long-term, and over the life of your investment many different conditions will occur that may favour certain funds over others at any given time.

If you're not sure whether you're invested in the KiwiSaver fund most appropriate for your needs and goals as an investor, then it's best to seek professional advice.

•Sam Stubbs, Tower Investments chief executive.

Can someone please explain the "member tax credit" to me? How does it link to my tax?

Despite its name, the member tax credit doesn't actually link to your personal tax at all. It's a government subsidy paid directly into your KiwiSaver account each year and doesn't impact on any tax you otherwise may have to pay (or be refunded).

Credits are available to actively contributing New Zealand resident KiwiSaver members aged over 18 who have not reached the age where they can withdraw their funds, and are well worth having.

For every dollar you personally contribute to your KiwiSaver account (excluding any government or employer contribution), the government contributes 50c up to a maximum of $521.43 a year.

To receive the maximum amount you therefore need to contribute at least $1042.86 during the KiwiSaver year, which runs from July 1 to June 30.

If you join halfway through, your maximum entitlement will be $260.71 (half of $521.43).

To qualify for tax credits, you don't have to be contributing to your KiwiSaver account only from wage or salary deductions via Inland Revenue.

Entitlement is based on your total contributions, whether they have come from wage or salary deductions via Inland Revenue, or directly from additional personal contributions made throughout the year (meaning they are a benefit also available to the self-employed and non-employed).

If you do contribute to your KiwiSaver account via wage or salary deductions but don't contribute at least $1042.86 during the year, you can top up your contributions with an additional contribution at any time before June 30 to qualify for the maximum payment.

Tax credits are usually paid into your KiwiSaver account sometime in mid to late July.

For more details on the credits you can visit the Inland Revenue KiwiSaver website at http://www.kiwisaver.govt.nz/new/benefits/mtc/

•Sam Stubbs, Tower Investments chief executive.

•Disclaimer: Information provided is stated accurately to the best of the respondent's knowledge at the time of publication.

It is general in nature and should not be construed, or relied on, as a recommendation to invest in a particular financial product or class of financial product. Readers should seek independent financial advice specific to their situation before making an investment decision.

To have your KiwiSaver questions answered by the Herald's panel of industry players email Helen Twose, target='_blank'>helentwose@gmail.com.