You have just started a new job and your employer has enrolled you in KiwiSaver. This is the first time you have been enrolled in KiwiSaver and you decide not to “opt out”. You are interested in estimating how much your KiwiSaver fund could be worth when you retire.

You make the following assumptions:
• You are 25 years old now and will retire in exactly 35 years when you are 60.
• Your salary is $60,000 this year and you expect this to increase by 3% every year.
• Your employer must contribute 3% of your pay into your KiwiSaver fund each year.
• You will be entitled to the annual government contribution of $521.43 which will be
credited into your KiwiSaver fund every year.
(https://www.ird.govt.nz/kiwisaver/kiwisaver-individuals/how-kiwisaver-works)
• You will make no withdrawals or additional contributions (other than those
mentioned above) to your fund until you retire in 35 years.
• For simplicity, assume that all contributions to your KiwiSaver fund are made once
per year, at the end of the year. The first lot of contributions will be made in one year
from today.
• Regardless of the return earned, the manager of your KiwiSaver fund will charge a
management fee of 1.0% at the end of each year, based on the opening balance of
your fund each year.
• For simplicity, assume that your KiwiSaver fund’s annual rate of return will be fixed
at a (random) rate ranging from 5% (min) to 10% (max) over the entire 35-year period
- i.e., the same rate each year over the 35-year period.
• You can choose to contribute either 3% or 10% of your salary.

You are trying to decide whether to contribute 3% or 10% of your salary and would like to
see how much your KiwiSaver fund would be worth at retirement under the following 4
different scenarios listed in the table below.
Total value of KiwiSaver fund after 35 years – Scenario analysis
Employee contribution rate
3% 10%
Annual return over
the period
5% (min)
10% (max)

Calculate the total values under each scenario in the table. To support your answers, you must show your workings. Include detailed explanations of your calculation for ONE (instead all four) of the quadrants in the scenario analysis above.