Why are we winding up The Capital Stable Portfolio ("Capital Stable")?

Capital Stable's underlying investments consist mainly of term-deposits and we now consider that current and forecast deposit interest rates are unable to provide the future return needed to meet the investment needs of members. The decision to wind up the portfolio, rather than change the underlying investment strategy, reflects the fact that the Lifestages KiwiSaver Scheme (“Scheme”) has other investment options with features that could better meet the investment needs of members. More information about the Substitute Portfolio, including its asset allocation can be found below.

What is a “wind up”?

A wind up is a formal process where we close a fund for good. This means any members who are invested in the fund at the time of closing need to have the value of their investment transferred to another fund within the Scheme, if they haven’t already done this prior to the wind up.

What is the wind up process?

We resolved to wind up Capital Stable with effect from 15 July 2021. The governing document (the trust deed) requires us to choose a Substitute Portfolio within the Scheme into which we will re-invest your Capital Stable balance and your future payments – unless we receive notice from you directing us to do something different. Before doing anything, you should refer to the current Product Disclosure Statement (“PDS”), which contains important information about the investment options available.

If we don’t receive a switch form by 15 July 2021 (the end of the notice period), we’ll switch your Capital Stable balance and direct any future contributions that would otherwise have gone into Capital Stable into the Substitute Portfolio at the end of the wind up period.  

After 15 July 2021, we will cash up all of the investments and pay all of the liabilities of Capital Stable. We expect to be able to conclude the wind up process and have your balances switched to your new investment by the end of July.

What is the Substitute Portfolio?

The Substitute Portfolio is a 25% investment into the Lifestages High Growth Fund (“High Growth Fund”) and 75% investment into the Lifestages Income Fund (“Income Fund”). Below you can compare the asset allocation of the Substitute Portfolio to Capital Stable. 

One of the largest differences between Capital Stable and the Substitute Portfolio is the use of term deposits. As we now consider that current and forecast term deposit interest rates are unable to provide the future return needed to meet the investment needs of members, term deposits form a smaller part of the Substitute Portfolio relative to Capital Stable.

Investments in international fixed interest will be 100% hedged back to the New Zealand dollar, generally via the underlying fund. Similarly, investments in international equities will aim to be 50% hedged back to the New Zealand dollar, generally via the underlying fund.

This combination of funds currently has the same risk profile based on the returns data for the 5 years ending 31 December 2020. However, the risk profile is not a guarantee of each fund’s relative future performance.

The Substitute Portfolio has lower fund charges than Capital Stable due to the nature of its underlying investments.

More information about the High Growth Fund and the Income Fund can be found in the Scheme’s PDS and statement of investment policy and objectives (“SIPO”). Both of these documents, and other important information about the Funds can be found on the Disclose register at www.disclose-register.companiesoffice.govt.nz/.

What happens to payments and withdrawals during the wind up period?

Up until the conclusion of the notice period, we will continue to receive your contributions into Capital Stable.

The governing document suspends withdrawal payments out of Capital Stable during the wind up period. However, the withdrawal suspension provisions of the governing document are subject to the KiwiSaver Rules. This means that we are able to process and pay out applications for first home (and second chance) withdrawals in accordance with normal timeframes.

Withdrawal applications on the grounds of Significant Financial Hardship will be processed by the Supervisor (Trustees Executors Ltd) and whether any payments can be made during the wind up period will depend on its view of the urgency of the application.

All other requests for withdrawals from Capital Stable (including account closures and scheme transfers) will be processed and paid as applicable at the conclusion of the wind up, unless we and/or the Supervisor determine that to not pay during the wind up period would be inconsistent with the KiwiSaver Rules. Please contact us if you need to make an urgent withdrawal during the wind up period.

What happens to my future contributions after the wind up?

After the wind up, any contributions that would normally have been made into Capital Stable will instead be invested into the Substitute Portfolio (which is made of a mixture of the High Growth Fund and the Income Fund) or to the allocation you nominated in any switch form you gave us.

For instance, if prior to the wind up you normally contributed $100 per fortnight into Capital Stable, you would now contribute $100 into the Substitute Portfolio ($25 into the High Growth Fund and $75 into the Income Fund).

If you already contribute to the High Growth or Income Fund, your Capital Stable contributions will be added to these. As an example, if prior to the wind up you normally contributed $100 into Capital Stable and contributed $100 to the High Growth Fund, you will now contribute $125 into the High Growth Fund and $75 to the Income Fund.

Automatic rebalancing

The Scheme provides an automatic rebalance feature. This means that in August each year, your accumulated balances will reset to your Investment Profile i.e. the mix of the High Growth Fund and Income Fund you have chosen to be invested in.

As the High Growth Fund tends to grow faster than the more conservative Income fund, it usually means each August we sell some of your High Growth Fund units and invest them in the Income Fund.

If you only invest in Capital Stable right now, after the wind up you will be rebalanced back to the current Substitute Portfolio allocation of 25% High Growth Fund and 75% Income Fund every August.

What if I already have investments in the High Growth Fund or Income Fund?

Any investments you may already have in the High Growth Fund or Income Fund are unaffected by this wind up. If you usually invest into either of these funds, your investments, including additional contributions, will continue as normal during the period.

However, after the wind up you will find that your overall Investment Profile will look different. For instance, if prior to the wind up your Investment Profile was 50% in Capital Stable and 50% in the High Growth Fund, after the wind up it will be 62.5% in the High Growth Fund and 37.5% in the Income Fund. This is because we are adding 25% of your Capital Stable allocation (25% x 50% = 12.5%) to the 50% you already allocate to the High Growth Fund (12.5% + 50% = 62.5%) in this example.

Overall, your risk profile remains the same, even though it may look like you have more or less invested in the High Growth Fund or Income Fund.

What if I have more questions?

We’re with you. Contact your investment adviser or call us on 0800 727 2265.

Click here to switch your investment profile early (before 15 July 2021)