Equity risk versus retirement adequacy: asset allocation solutions for KiwiSaver

Kirsten L. MacDonald, Robert Bianchi and Michael Drew

Accounting and Finance, 2020, vol. 60, issue 4, 3851-3873

Abstract: New Zealand's KiwiSaver superannuation system operates with a conservatively low asset allocation towards equity investments. Evidence suggests ‘conservative’ portfolios are riskier than portfolios holding more growth assets when considering shortfall risk. This study employs stochastic simulation to determine the optimal asset allocation to improve the balance of probabilities for retirement adequacy. The findings show that KiwiSaver default funds are excessively conservative, preventing investors from reaching their retirement goals. Increasing the asset allocation to equities across the range of available KiwiSaver funds is the only solution to significantly improve retirement adequacy in New Zealand given the low contribution rates observed.

Date: 2020
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https://doi.org/10.1111/acfi.12481

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Working Paper: Equity risk versus retirement adequacy: Asset allocation solutions for KiwiSaver (2014)
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