Not all KiwiSaver funds are the same – here’s how to get more money in yours

Since it was first set up in 2007, KiwiSaver has been a fantastic mechanism to boost New Zealanders’ personal savings. Today, almost two-thirds of Aotearoa’s population are members, with more than $100 billion collectively saved in the scheme. But are we all getting the most we can out of it? Possibly not.  

It can be overwhelming to choose where to put your KiwiSaver money. There are loads of different options out there, and they’re often explained with a whole lot of jargon. 

Also, a lot of us (close to 300,000) are enrolled in default funds, which is when you’re assigned a fund and provider automatically because you haven’t specified a choice.  

Although any KiwiSaver fund is better than nothing, being in the wrong fund could mean reaching retirement and realising you could have been hundreds of thousands of dollars better off. 

The fund and settings you choose can have a massive impact on how fast that nest egg grows. Here are five criteria every one of us should be considering to make sure we’re in the right fund. 

1. Which level of risk is right for me? 

We tend to group KiwiSaver funds into five categories based on how much of the more risky investments they hold, like shares and property. Depending on how long you’re investing for and your attitude towards risk, one type (defensive, conservative, balanced, growth or aggressive) will probably work best for you. 

This may seem like a minor detail, but the monetary reward (or cost) can be massive. On average, you could have $135,000 more in your KiwiSaver account when you reach 65 just by switching from a conservative to a growth fund.  

The key is considering your time horizon – risky funds are more appropriate if you’re not planning on using the money soon, so if you’re thinking about buying your first home or nearing retirement, they may not be right for you. 

The Sorted KiwiSaver fund finder can help you determine the right fund for you based on how soon you intend to use your KiwiSaver money, your comfort level with gain or loss, and your attitude towards ups and downs in value of your KiwiSaver fund. 

2. Keep an eye on KiwiSaver fees 

The fees you pay can make a big difference to the amount you have when you retire. This is especially true if you’re in KiwiSaver for many years. You won’t believe how much these add up to over time! Sorted’s KiwiSaver fund finder allows you to compare the fees across different funds and providers.  

KiwiSaver fees are one area in which it’s not necessarily true that ‘you get what you pay for’. In fact, it’s more like ‘you don’t get what you pay for’, since fees are subtracted from the overall return, so the lower the fee, the more money ‘returns’ to you. 

Higher fees don’t necessarily mean higher returns or better service. When fund managers buy and sell shares, and sometimes other assets, they manage this in either an active or a passive way. Active managers usually trade shares frequently, looking to enhance their returns, whereas passive managers simply buy and hold a range of shares – often the shares in a market index such as the NZX 50. Active management costs more, so the fees tend to be higher. 

It pays to do your research to find out whether the fees are worth it for you. Even if they seem tiny percentages, over 40 or 50 years, fees can add up to more than $100,000, so you’ll want to make sure you’re getting your money’s worth.  

3. Make sure your provider offers the services you need

When it comes to telling you how fast your KiwiSaver account is growing, helping you decide which fund to be in, or offering alternatives or assistance, some providers give you more of a hand than others.  

The level of service you want can be an important factor in choosing a KiwiSaver fund. For the fees we pay, each KiwiSaver provider invests our money and offers help and communications that help us stay on top of our investing. 

Sorted surveys KiwiSaver providers every six months on how many important services they offer, then scores how well they compare. You can see the ratings in our KiwiSaver fund finder. 

4. Take returns into account 

You may be surprised that returns aren’t the first thing on this list. Sure, returns (after fees) are the most important measure of our results and how much our money has grown, but although returns can show us how a KiwiSaver fund has performed in the past, they don’t show how they’re going to perform in the future, so it’s important not to switch funds based on past returns.  

That said, if you see consistently poor returns while comparing KiwiSaver funds, it may be a sign of poor management. Make sure to take returns into account but take the longest-term view of how the fund has performed over time (and only after you’ve looked at its risk level, fees and services).  

5. Does your KiwiSaver fund align with what you believe in? 

Because KiwiSaver tends to be a pretty hands-off investment, it’s easy to forget that your money is being invested in specific companies and helping them grow. 

Have you ever considered whether your money is backing companies that align with your values? If you haven’t, you could be helping to fund businesses that violate human rights, are cruel to animals, are not climate-friendly or produce weapons.  

We all care deeply about different things, so have a think about what’s most important to you and check your KiwiSaver aligns. 

Mindful Money has some great information on the ethical profiles of different KiwiSaver funds, including a fund checker that shows you what’s in your fund.  

How to change your fund  

If you decide you do want to change your KiwiSaver fund, it’s easy to switch – either to another fund with your existing provider, or to another provider entirely. If it's with your current provider, you may be able to switch funds online. 

If you’re joining another KiwiSaver provider, just contact them directly. You’ll need to fill out a membership application, but they do most of the heavy lifting to get everything in order. They’ll tell Inland Revenue and arrange for your funds to be transferred, which typically takes between 10 and 35 days. 

Within a few weeks, your money will be flowing into your new fund for your future.