Not long ago I met a retired couple whose savings had evaporated after their finance company went belly up. They had come through that disaster with dignity, but I could tell it had been devastating.

This got me wondering about KiwiSaver: where does all the money we’re putting in go? After all, we’ve got contributions going in from ourselves, the government and (if you’re an employee) our employers. It’s a sweet deal, but show me the money, please.

So I had a look under the bonnet a bit.

Many think KiwiSaver is somehow guaranteed by the government: it’s not and never has been. True, it was set up by government legislation, and Inland Revenue helps it happen, but KiwiSaver funds are entirely managed by private providers like banks and investment houses.

With KiwiSaver, your money is pooled with other members’ money and invested by fund managers. To see who’s managing your money, look up your fund in the KiwiSaver fund finder.

There are always risks involved with investing, and the value of any fund’s investments can go up or down over time. How much you get back in the end will depend on whether the ups are bigger than the downs.

But in the meantime, where is our money kept?

The important thing to know is that KiwiSaver schemes are trusts – meaning that the assets are held in trusts  for us that are entirely separate from the provider. And in publicly offered KiwiSaver schemes, the trustee (which must be completely independent of the provider) also has the role of checking whether the provider complies with its legal obligations. You can find out who acts as the trustee of your KiwiSaver fund in your investment statement.

So as opposed to that retired couple, who had basically loaned their savings to a finance company and then couldn’t get it back when the company folded, our KiwiSaver money is tucked away in a trust and stays ours (never the provider’s).

That means if a KiwiSaver provider’s business were to get into difficulty, our money held in trust would be “ring-fenced” – protected from their troubles. Your investments would not be affected, even though the provider’s own business or shares might plummet.

We wouldn’t be required to pay anything to anyone if that happened, and if the provider’s business failed the trustee could step in and appoint a new manager for our money.

And we would still be on track to reach our goals. 

Comments (3)

Gravatar for Nkbidy


7:41pm | 11 Mar 2022

Yes, your money would be lost upon a massive global crisis that bad the government requiring money from these providers like banks. And you can't get your money back by just wanting it back, they set it up that way so that upon a crisis where everyone wants their money back, they don't go bust

Gravatar for Nigel


10:50am | 26 May 2020

what if, because of the current world financial crisis I personally don't trust any financial institution with my money and wish to withdraw it: eg- kiwisaver. How can I do this without going through their hardship process. I'm with Mercer group and the website only lists 4 possibilities for withdraw. My issue is with the lack of confidence in the world financial sector as a whole. I'm safer with storing it under my mattress. At least I can't get hacked, it can't be mismanaged, I don't fpay or my own administration of fees. Yes, I lose out on the "possible" growth promised but at least it's all my own.

Gravatar for Rick


3:42pm | 28 Aug 2019

Further to Richard's question and Tom's answer, KiwiSaver institutions wouldn't actually hold your money in its trust account but would be sitting outside the trust account being invested via shares, cash, etc, which means that, in the case of cash investments, if a bank went bust then your KiwiSaver portion that was invested with that bank would be lost. Is this correct?