Case study

Rachel and Tala are in their early 40s and have two boys together, Callum (8) and Leroy (5).  Rachel also has an adult daughter Ruby from a previous relationship.

Rachel works full-time in the marketing industry. She is salaried and receives good pay rises each year. Tala has been working hard over the last few years to build up his own adventure tourism business. Although some years have been better than others, he is excited by the recent increase in corporate clients booking team-building sessions. Both Rachel and Tala are incredibly grateful to be able to pursue careers that they love. They intend to continue in these until they turn 60 when they plan to retire early and travel extensively.

Rachel only recently joined Kiwi Saver and regrets not doing it sooner. Tala joined 10 years ago and contributes regularly. They are both currently in default funds but have each recently completed risk profile questionnaires. Rachel identified as a conservative investor and Tala as an aggressive investor. They intend to switch their kiwi Saver to funds that match their respective risk profiles once they have purchased a house.

While Tala is a great saver, his spending habits leave a bit to be desired! He tends to spoil the boys every chance he gets. He is a born risk-taker in everything he does in life. Rachel however is highly conservative and likes to protect herself from risk wherever possible.

Rachel and Tala have had an offer accepted on a 1970s bungalow. The deposit came from a combination of kiwi Saver, savings, and a small inheritance Tala recently received. Both are very handy and have a great eye for design; they plan to modernize the bungalow over the next few years to make it a home of their own.  They have committed to a tight budget to save for the renovations and meet their goal of reducing debt quickly to support their early retirement plan.

They live a minimalist lifestyle and have not invested much in furniture over the years. As such, their contents are rather worn and not worth a lot. They have two vehicles. Rachel recently upgraded to a new hybrid. Tala drives an old 4WD which while he loves it, he knows it will need to be replaced soon as it is getting expensive to maintain. He often jokes that it is worth more for parts.

Rachel has a family history of eye disease and both she and Tala wear glasses. It is important to them that they maintain their own, and the boy’s eye health.

Task 1

Explain the key features of Kiwi Saver to Rachel and Tala.

Your explanation should include:

• contribution rates
• two benefits specific to KiwiSaver
• two benefits the same as other managed funds.

Your explanation should highlight Rachel and Tala’s different situations.

Task 2

Explain to Rachel and Tala the differences between the default fund and their proposed Kiwi Saver funds.

Your description of the three fund types should include the following features:

• Asset classes
• Level of risk and expected return
• Diversification
• Long term impact of their different attitudes to risk