Ep. 3: What does KiwiSaver mean for those in midlife?Ep. 3: What does KiwiSaver mean for those in midlife?

Brooke Roberts

Welcome to The Payoff, a podcast series where you’ll hear from everyday New Zealanders about their experiences and their dreams when it comes to putting money away for the future.

We’re talking KiwiSaver. 

Ko Brooke ahau.

I’m Brooke Roberts, one of the CEO’s of Sharesies, and today we’re talking about our values when it comes to money.

Petra Bagust

Everybody has values, whether they know what they are or not. We live out of our values. 

Brooke Roberts

And how we might have to unlearn some of our attitudes towards money as we reach a new life stage.

Petra Bagust

I ended up with a very fiscally conservative approach. If I didn't have it, I didn't spend it.

Brooke Roberts

Plus, do you know where your KiwiSaver is invested?

Voice 1

I’d much prefer to know that it’s going to something other than mining. Obviously you don’t always know where it’s going.

Brooke Roberts

And what exactly is ethical investing? 

John Berry

It’s really confusing for investors because there are terms like ethical, sustainable, responsible, green, conscious.

Brooke Roberts

Let’s introduce our first guest today. 

I was amped for this conversation with Petra Bagust.

She’s someone who is dealing with getting older in her own way, and it’s led to her hosting the top rated podcast Grey Areas, which is all about aging well in Aotearoa.

Petra has thought a lot about preparing emotionally and mentally for a time when she is not in paid work, And as you’ll hear, getting the finances in order, is a big part of that.

Petra Bagust

Money was this stressful, uh, a stress point in my family of origin, and my dad was fiscally optimistic, so he would be like, oh, it'll work out. It'll be fine, rather than fiscally responsible. And so he was always doing projects and dreaming schemes, but he wasn't always putting in the cautionary backstops and fail safes.

So that created a bit of tension and I mean, I love his enthusiasm, but I ended up with a very fiscally conservative approach. If I didn't have it, I didn't spend it.

That meant that I missed out on some opportunities as a young person. I just didn't, I guess, take good calculated risks. 

Brooke Roberts

And so, you know, we are here talking about KiwiSaver. How does that fit into your conservative, responsible, or more optimistic kind of view?

Petra Bagust

To be honest, I think my thoughts are way in advance of my actions, as far as KiwiSaver is concerned. So this idea of saving regularly, like I've sat down. And done calculations. If I put 5 grand into KiwiSaver a year, what do I end up with after 10 years or 15 years and use the calculator versus if I put in incremental amounts that add up to $5,000 in a year, how much will I end up with in 10 and 20 years. And the numbers are in. 

It is much better to trickle input. Like to trickle just small, regular small, regular save, save, save, save, save. I know this cognitively, but I end up as a contractor and not an employee putting in the amount, the minimal amount at the end of the year to get my government subsidy. You know, my little government contribution.

Brooke Roberts

Also just having that habit is so relaxing in terms of just having …

Petra Bagust

It’s so much more do-able. Finding small amounts often is so much more financially viable than a big amount occasionally. 

And I think that that's something, as a contractor you realise cos you're paid, um, irregularly different amounts. And so like you might have a windfall and then you might have a period of time where you've got less money and you think, oh, I can't do it regularly because I don't know what I'm gonna be paid.

I think that's, I think you have to call BS on that thinking. I think it's about committing to small amounts regularly, but you know, we are set up now in a world where, where that's possible, where it's automated and I think it's all about habits. Good habits, Good habits. 

Brooke Roberts

If you’re a contractor like Petra or self-employed, it’s a good idea to put that small amount away regularly.

And again, as Sim from Girls That Invest said in our first episode, it doesn’t have to be a lot, it’s more about the consistency over time.

Simran Kaur

The difference between putting away an extra $100 a month even just doing that in your twenties, the compounding effect that can have when you retire, whether that's in your sixties or you know, maybe even earlier, it can make a huge difference. And it just means there's more choice in your life.

Brooke Roberts

Now back to Petra, here we get to understand that there is a difference between saving and investing. 

Petra Bagust

I was addicted to not spending and that's kind of how I managed to have, quite a significant amount of savings when I got married. I had saved and had like this, you know, bought some wealth to the relationship. But I realised that I didn't bring I guess a dynamic wealth to it. It wasn't invested, it wasn't, um, diversified. It wasn't, um, deep. It was just like this lump sum.

Brooke Roberts

It’s encouraging to remember that it’s never too late—even if you have regrets, as we find out from Petra.

Petra Bagust

Not signing up for KiwiSaver when I was an employee of TVNZ. I can calculate how much I lost. How much they didn't put in.

Brooke Roberts

Petra told more of that story in the second season of her own podcast, Grey Areas.

Grey Areas clip

Petra Bagust

I look back and go, so stupid. 

Mary Holm

Why didn’t you? Do you remember?

Petra Bagust

I think it’s because I don’t have a habit of trusting institutions. I don’t like signing up to things. I’ve got this little mental block about joining things. It’s probably something to do with filling in forms. So …

Mary Holm

I don’t think there’d be that many forms to fill in.

Petra Bagust

I don’t think there would be either.

Mary Holm

No, no. Are you in it now?

Petra Bagust

I’m in it now.

Mary Holm

Good.

Brooke Roberts

How have you gone on your journey in terms of investing and um, and developing wealth? Going from, you know, I don't wanna spend money to actually, I wanna grow money.

Petra Bagust

I think we did a pretty, um, standard thing. We invested in some property. Which we have since divested. Well, we've sold that property. So there was a small amount of diversification, like a managed fund. Um, but that's my husband's retirement scheme. And, the, the minimal KiwiSaver. So, so I think that it, it, it's, now that I, we, we dabbled with the share market and it hadn't gone well. 

We kind of hooked into this energy and ended up with a broker overseas through a friend of a friend, and they weren’t solid and so we lost money. And so it’s this really easy thing where you can um once bitten twice shy.

And even though I know that the share market isn't that person, I get that there's, um, an emotional response to money. Like, like, you know, when the share market drops, it's not a logical drop, it's an emotional drop. People are afraid or people are on it or people are, um, excited. Or it moves not just through logic, but also through human emotion.

Brooke Roberts

Emotion can get to the best of us during a period of market volatility, and the last couple of years have been a bit of a white knuckle ride! 

We’ll talk about looking after your KiwiSaver in the ups and downs of the market later in the series. 

Something else that may be relevant in mid-life, is setting your kids on the right path. But as Petra says, it can take some time, and encouragement.

Petra Bagust

We put money in the account and, and we said to our daughter, try the stock market.

Here's a small amount of money. Just play. Because what she said to us was, mum, there are heaps of boys whose families have bought them, um, shares. And she said, us girls, we are going online and we are buying clothes and we look fantastic, but the boys are looking at their shares and I'm like, babe, you need to practise this.

And so at the end of a year, she still has the money sitting in her account and she hasn't invested in any shares.

Brooke Roberts

Wow. So after a year, it's just sitting there, not investing.

Petra Bagust

Half a year. It's still, it's just sitting there.

Brooke Roberts

And what are the steps you think could have, could help you or help your daughter or others?

Petra Bagust

Yeah, it's a good question and I wonder if it's the, the, the, the answer to the patai is as boring as talking about it more like literally education, literally talk, because I mean, I know in my, in my own life, I need to hear something two, three, maybe four times before I'm like, babe, I've had this great idea. And he said, I said that to you ages ago, I told you that. I said that. And I'm like, yeah, I just had to hear it from multiple sources. 

And I'm wondering, how can I say to our daughter, look, you, this is the, just have a play. Just back yourself but when you're young, you have no money. The idea of losing money, I think is actually really hard because you are, you are watching your pennies as a student in New Zealand.

Brooke Roberts

What would you be saying to those that are, that, um, are young, they haven't even thought really about ageing and it's like, oh KiwiSaver is ages away, you know, or retirement is ages away.

Petra Bagust

Of course, you never think you're gonna get older because you've never been older. You've got no experience of being older. So you're like, whoa. And it is far away. So you’re like yeah, that’s far away. 

So I think it's almost like, it's an act of faith. You're like taking a trust step or you're believing in your future self and you're saying, I'm worth it then. I'm worth it now, I'm worth it then. And you just, you just start in new habits. I reckon that just get the starter energy and if you've got a friend who's got good starter energy, hook arms with them.

Brooke Roberts

What are your views on sustainable investing, or ethical investing, when it comes to when you build your wealth?

Petra Bagust

Well, for me personally, I'm interested in investing in the NZX. Um, I like the idea of supporting homegrown, so that's one thing. Greatly appeals. And I am interested in ethical companies, so I don't want to be putting my money into companies that cause harm.

So I have a value, I, everybody has values, whether they know what they are or not. We live out of our values and I believe we can't go further than our values. So I would—values is going to be a primary driver. Ethical, tick. Yes please. Sign me up.

Brooke Roberts

So how do you actually make sure your investing aligns with your values?

The test is knowing what's in your KiwiSaver fund. 

So we asked around to see whether people knew where their money was going.

Voice 1

No, I don’t have oversight over that. And um don’t really understand that.

Voice 2

Not in what I’m currently in, no. I’d much prefer to be able to know that it’s going toward something other than mining or you know.

Voice 3

I’m on growth and I’ve got no idea at all.

Voice 4

I don’t. No I don’t. And that’s a really good question, because it’s not something I’ve really ever looked into. I’ve just kind of put my trust into, like most people, you assume it’s kind of in something that you’d be moderately fine with, or supportive of, you know?

Brooke Roberts

That’s an eye opener, isn’t it? And you might be wondering what your KiwiSaver is investing in.

There’s a few ways to check on your KiwiSaver fund, but we’ll get to that soon.

First, let’s unpack what ethical investing is.

John Berry

Look, it's really confusing for investors because there are terms like ethical, sustainable, responsible, green, conscious. For me, the, the two main ones are probably ethical and responsible.

Brooke Roberts

This is John Berry, the CEO and co-founder of ethical fund manager Pathfinder Asset Management. 

John Berry

The responsible investment framework is if, if I take climate change into, into account, for example, as a responsible investor, I would be saying how is that gonna impact companies? What risk is climate change gonna have on a company long term? How does that impact the risk of investing in that company?  

And it's measuring risk and return from climate change. It's nothing about values, it's just about I'm gonna be a responsible investor. How do I take account of climate change over the long term to impact my returns?

So an ethical investor does that, but also says, from a values-based perspective, climate change is likely the largest single challenge that our society, civilization, and ecosystems face. We need to take account of that in our investing. So ethical, is like a values overlay on top. It's more than just risk management for making more money. It's also values on top. 

Brooke Roberts

For someone starting out who wants to learn more about ethical and responsible investing what, what would you be teaching them?

John Berry

The starting point for me is, is the why, like, why would you care about ethical investing? And for me, that's, I wanna be a good a good ancestor. I wanna leave the world in a better place, the planet in a better place for grandchildren and beyond. Then it's also the acceptance that the way you invest actually has impacts in the real world.

So we all get it as a conscious consumer that how you spend your money has an impact. You can choose to take the bus or buy products with less packaging that has a real world impact. How you spend your time has a real world impact. How you invest your money is exactly the same. 

For me and, and our team, how we think about ethical investing is quite aspirational. We say, let's not invest for the world we have, let's invest for the world we want. So think about the world you want in 20 years. How do you invest to try and get to that place? 

Brooke Roberts

The Make My Money Matter campaign in the UK, argues that where your pension money is invested, is more effective at saving the planet, 

than not eating meat, not flying, and using renewables combined.

So if you’re wondering how your KiwiSaver provider stacks up, Mary Holm shares a great Kiwi resource you can use to look at your KiwiSaver, or in fact any managed fund you’re invested in.

Mary Holm

The best source of information on that is a website called Mindful Money, which is run by Barry Coates, who used to be a Green Party MP. And that it, it's a charity and they rank KiwiSaver and non-KiwiSaver funds on ethical issues.

It's quite neat because you can actually tick boxes that say which issues matter more to you. For some people it's largely about the environment, but for others it might be about tobacco and health issues. Or it might be about cruelty to animals, or it might be, you can tick which boxes matter to you and find funds that sort of suit your particular take on ethical investing.

Brooke Roberts

This is a great time to go back to John, who has a very helpful 5-step approach when thinking about ethical investing.

Firstly, exclusions. So what do I not want my money invested in? And exclusions are negative in a sense because you're avoiding investing in fossil fuels or animal testing or alcohol. And you're not necessarily gonna change the world in a hurry by doing that, but it's gonna help you sleep better at night, right?

And exclusions are a great starting point, but for me, you've gotta do more and you've gotta be positive. So step two, sustainable themes. Think about the large global long-term themes that are good for the planet, but also gonna make money for investors. And that could be water, it could be renewable energy, it could be social housing, or energy efficiency.

Thirdly, look for good companies. So people talk about ESG: environmental, social, and governance factors. We measure companies on these factors. It doesn't tell us what the impact on, on the real world is necessarily gonna be from that company, but tells us if it's a good company, if it looks after its staff and suppliers, if it's well governed.

Fourth step is engagement. So engagement is talking with companies and trying to effect change. So telling management what you like or what you don't like about what they're doing. Voting as a shareholder to effect change. 

And the last one is impact. Impact-generating. So invest in a way. You know, we talked earlier about the private companies and how they can be impactful, find those investments and invest in them, and that's the hardest part, impact is the hardest part, but also potentially the most beneficial in terms of the real world outcomes. 

Brooke Roberts

The big question many people have is, okay so we’re saving the planet with our green investments, but are we losing out on higher returns? Could being environmentally conscious mean we end up retiring poor?

A lot of us assume this is the case. John explains that there are two factors at play.

John Berry

Look, I suppose there’s two ways of approaching it. The first is just to think qualitatively around what it means to be a good company, and what that would do for your profitability. 

So if you’ve got a company that looks after its staff, it will have higher productivity, lower staff turnover, fewer sick days. You’ll make more money with a more engaged workforce. If you have policies and procedures to manage risk in relation to the environment, you’re at less risk of a spill or an environmental issue, so you’ll have lower costs from restoring the environment from whatever damage it may cause.

So there's all these reasons intuitively, why being a more ethical investor or being valuing environmental and social metrics makes you a better company and a more profitable company. 

And the data globally tells us that using environmental, social, and governance metrics with companies will give you the same or better returns.

Yeah. And that makes sense with what we're seeing in terms of, well, people are looking at investing in companies that are gonna be here for the long haul and also tackling. Massive issues that we are facing globally in, in Aotearoa. 

If you think of KiwiSaver as a long-term investment from many people in a growth fund. What we are interested in is not what's gonna happen in the next day or the next week. It's what's gonna happen over the next few years or the next decade. And so that's macro trends. It's choosing companies that are going to make money and impact through large structural changes in the economy.

Brooke Roberts

I asked John, about whether the responsibility he has, managing a big heap of people's nest eggs, keeps him up at night. 

John Berry

Yeah, look, it's a huge responsibility and I suppose that's what I love about the job is it feels important and it is important managing in the KiwiSaver space, managing money for people's retirement.

Brooke Roberts

Pathfinder, the KiwiSaver provider that John heads up, has more than 500 million dollars invested. 

John Berry

And you know, for a lot of people it will be one of the largest assets they have when they retire. As part of that responsibility, we don't want to lose investors' money. We wanna make them great returns. We want to have systems and processes in place that produce consistent results for investors. 

And that that's a huge responsibility. Not just hold the money and manage the money, but also deliver the wider education piece as well. 

Brooke Roberts

We’ll hear more from John about what happens to your money behind the scenes later in the series. Back to Petra, like the rest of us, she has dreams about how she wants to live when she stops working. 

And it got me thinking about money being the vehicle for choice, but not the driver for how to live life.

Petra Bagust

It, it really is about having the option to connect with my whānau. Like being, if my children are living somewhere else, if they've got children, being able to be involved and accessible and able to access them. So I might need to travel to them, being able to host them. So having a property where I could have people to stay, so manakitanga is pretty important. But it's not gonna be because my life is involved travelling.

It won't be, I'm gonna travel the world. I'm not saying it wouldn't have travel in it, it's just not where I'm. So I think that I, I want to have fiscal solidity. I do want to have that sense of being, um, resourced or as safe as I need to be.

Brooke Roberts

Is there any elements too of, uh, what you want to leave your tamariki and mokopuna too?

Petra Bagust

Uh, I think, I think my main understanding about it is that they usually need the money before you're dead. So that whole idea of legacy, it doesn't interest me so much. 

My husband says to his mum all the time, spend the money. Spend it. Like, it's yours. Invest it and spend it, but it's yours.You've worked hard for it, do it. 

And by the time she passes, literally we are, we are old, we are fine. So I think that, um, my, my fiscal journey is about how can I be responsible now and resource my children now at the, the earlier stages of their journey. So it's what to hold onto and what to let go of that tension, you know?

Brooke Roberts

So what did we cover in this episode? Here’s 3 takeaways.

One. Investing in KiwiSaver in mid-life is well worth it and if you haven’t it’s never too late to start, including if you are a contractor.  

Two. It’s important to know what your KiwiSaver fund invests in and whether it aligns to your values. So check it out. 

Three. Ethical investing goes by many names, which can have different meanings. Here’s some things to think about. Are there industries you’d like to exclude? Are there sustainable themes you’re interested in? Are the companies you're investing in good employers? And if you can, consider investing in private companies doing good. 

Brooke Roberts

Next time on the Payoff.

A great korero with Pio Terei, who recently turned 65. 

Pio Terei

It should be called freedom or something like that, you know? Ha a watea.

Brooke Roberts

We find out how he sees retirement now that he has access to that nest egg.

Pio Terei

You can go okay, I've got more time to help other people, and enjoy this life.

Brooke Roberts

And we throw a bunch of less well-known KiwiSaver questions to Tom Hartmann from Sorted. 

Tom Hartmann

We suspect that assets are not being valued. It’s really important to be savvy about what’s going on here.

Brooke Roberts

That’s coming up on The Payoff.