Q. I'm not in KiwiSaver but my main concern is inflation. Every central bank in the world is printing money, countries are borrowing at virtually 0 per cent and NZ is $68 billion in debt. I know everyone warns you about real estate but I bought a house in Havelock North in 2006 for $300k which is now valued at $500k - a 40 per cent increase in eight years. Another example, petrol in 2006 was $1.70, today petrol is $2.16, which is a 21 per cent increase, so your purchasing power is being eroded. Leaving your money in an account earning a pittance while fund managers scoop out their fees is pointless. Furthermore, no one I have asked can tell me where their KiwiSaver provider has invested their money. Why should anyone bother with KiwiSaver?
A. First, a couple of corrections in your calculations: the increase in house price you quote is 66 per cent, not 40 per cent - and the increase in petrol is 27 per cent, not 21 per cent.
To calculate an increase in price divide the difference by the lower figure. To calculate a price drop do the opposite - divide the difference by the higher figure.
Having got that out of the way, let's look at the increase in value in your house. While on paper it looks impressive, if you calculate the increase in value over the eight-year timeframe it works out to less than 7 per cent a year. I would also point out that you have probably spent money on the house over this time, which should be deducted from your estimated sale price for a fair comparison.
To compare KiwiSaver as an investment, you can use the FundFinder tool provided by Sorted. Many KiwiSaver funds have outperformed your house, with the top performing fund achieving over 12 per cent a year since July 2007 after fees and tax). For many people the investment returns are less significant than the Government and employer contributions which provide a very decent "return" on their own. Someone earning $40,000 at age 35 will be contributing just $23 per week themselves into their KiwiSaver fund, but this will be topped up with $19 from their employer (that's after tax) and the initial "kickstart" and yearly MTC from the Government. Even saving at that modest level is likely to give them a lump sum in excess of $200,000 at age 65 when their KiwiSaver is unlocked.