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Riding out COVID-19 in KiwiSaver

25 January 2022
Reading time: 1 minute

Posted by Tom Hartmann , 13 Comments

Whether it be from Omicron or inflation, there's a lot of talk about the ups and downs in the sharemarket. What does it mean for you and your KiwiSaver?

Our take on it remains the same: everyone keep calm, carry on with your long-term investing. But since there might be some rough road ahead, here are some FAQs to help:


KiwiSaver and COVID-19: what you need to know

Your KiwiSaver account is not like a savings account where you store the money you have. It is an investment account, where the money you put in buys “units” of investments like shares, bonds or commercial property. The value of these units goes up and down on the sharemarket, for example, and so your KiwiSaver balance goes up and down with it.

Imagine you owned a single part of an orange sitting on a shelf in a supermarket, just a segment of it. When oranges sell for more at that market, the value of that bit you own is higher. When the price of oranges falls, your segment is worth less. Depending on when you sell it, someone else will pay more or less for it, and it will be worth a certain amount.

So your KiwiSaver balance does not show what you “have” (like in a savings account), it shows what your investments are “worth” at a given time. And when the sharemarket falls, your balance can too.

When you own shares, you own a part of a business – you are a part owner. When something like COVID-19 happens, businesses and the profits they make are negatively affected, making them less valuable (which just means people will pay less for those shares you own).

That’s essentially the rough road that's happening in the sharemarket. COVID-19 continues to affect many economies by reducing the production of goods, demand from consumers, imports and exports, and travel, among other things. So the businesses you own are facing headwinds, and the shares in those businesses fall in value as a result.

No one can foretell the future (although many try). What we do know is that the market is volatile at the moment – a day of falling may be followed by a day of recovery. This is a reflection of the uncertainty surrounding Covid-19 and inflation, and what will happen. Each time something new happens, the market adjusts its future outlook and share prices rise or fall accordingly. 

As a KiwiSaver investor, you have a choice whether to react to each thing that happens, or instead have a strategy in place to not have to do anything. When your KiwiSaver is set up in line with your goals and the right level of risk for you and your circumstances, these events and market swings are not as important. You can set and forget; you can ride out the ups and downs, even if it is a rollercoaster. Here’s how to adjust your KiwiSaver settings.

The moment you switch into a fund with less volatile investments (like cash or bonds), you are choosing to avoid steep falls in value that come with the more volatile ones (like shares and commercial property). But you are also stepping away from potential windfalls that generally come from investing in those kinds of investments. And if you’ve seen your balance lose money, you miss out on any eventual recovery.

It’s important to make a choice that helps you reach your goals... and not lose sleep at night, either!

The key question to ask is, ‘How soon do I need to use that money?’ If you are investing for the long term (more than 10 years away), you can generally take on more risky investments like shares because you have the time to ride out the ups and downs and take advantage of the potential growth in value.

Here are three questions to help you decide which type of KiwiSaver fund is right for you.

If you’re deciding using your KiwiSaver to buy a first home within the next three years, you don’t have time on your side. There is a category of KiwiSaver funds that are “defensive” which hold mostly cash. Here’s a list.

You need to choose whether to invest in safer investments like cash, which never go down in value, to make sure the money will be there when you need it.

When you switch to a 'defensive' fund, however, you may trade possible gains in the sharemarket over the next few months for the security of avoiding losses. It’s important to consider whether this is the right move for you, and it can help to consult your KiwiSaver provider.


The important thing to know with KiwiSaver is that you do not need to take all your money out or close your account – you can stay in for as long as you like.

So the key question once again (you can sense a theme here) is, “How soon do I want to use that money?” If you'll need your KiwiSaver money straight away (i.e. you need to use it as soon as you retire), then you’ll need to pull it into an investment mix that is defensive in order to make sure the money’s there. But if you can wait a while (4–9 years, or a decade or more away), it can be invested in a conservative, balanced or even growth fund.

Research shows that it’s near impossible to time the market. What seems like the bottom may only be a false bottom, and there is more of a drop to occur; or what seems like the very top may only be a small peak in the greater scheme of things.

The goal is to have an investment strategy in place based on your goals so that you don’t ever have to react to everyday ups and downs and can just stay the course. Find the right type of fund for you, pick your fund, and stick to it until your circumstances change and you need to adjust your strategy.

You can suspend your savings for up to a year at a time, and then renew each year thereafter. Keep in mind that when you do, you are walking away from any employer contribution and government contribution you are entitled to, which means you’ll miss out on this money as well as the investment returns it would have earned for you over time.

Setting aside a set percentage of your earnings regularly gets you two things: the government’s annual contribution of $521, and the opportunity to buy investments that have fallen in value recently – and therefore are more on sale than they have been. If you are buying into KiwiSaver in the next few years to invest for the long term, don’t  be concerned about losing money, but just focus on the buying opportunity going forward.

Significant hardship is one of the legitimate reasons to withdraw your KiwiSaver money – that has always been an option in KiwiSaver. It’s available if you are unable to meet your living expenses or mortgage repayments, paying for medical treatment, suffering from serious illness, paying for funeral costs for dependants, and even modifying your home to meet special needs because of disability. The only thing you can’t withdraw is any government money that has been added. If you’ve been a KiwiSaver member for at least three months, contact your KiwiSaver provider directly (employees who have more recently joined need to contact Inland Revenue instead).

So the short of it is that your KiwiSaver money can be used for hardship in the short term, but if you can find alternatives, your long-term wellbeing can stay on track. It’s a trade-off and you need to be sure to make an informed decision. Sorted and the money mentors at MoneyTalks can help you look at other ways of meeting expenses without tapping your KiwiSaver fund.

Comments (13)


  • Gravatar for mo

    1 June 22

    KiwiSaver feels like a scam, forced to have it and pay in, but the provider is always losing investments and so I am losing more money than I am putting in, I feel it would have been better saving it in a bank.

  • Gravatar for

    5 May 22

    What are the fees charged for each kiwisaver provider

  • Gravatar for John A

    20 April 22
    John A

    I can't understand why people are moaning about their Kiwisaver totals dropping a bit. We are with Milford, and in the past 3 months its conservative funds have dropped 2% to 3%, while its growth funds have dropped about 4%. But over the previous 3 years, those funds have increased by 7% to 13% each year, while banks have been paying only 1% interest and inflation has been dropping the buying power of savings by 2% to 3% each year.

    This year inflation is likely to be more than 5%, so taking money out of Kiwisaver and putting it in a savings account wont make any improvement. Already some of the Milford Kiwisaver funds are rising again as tourism gets going once more.

    If most funds are falling, put your big deposit into the Kiwisaver cash fund. Watch all the funds each week, then when the other funds start rising again, shift your money to a balanced fund.

  • Gravatar for

    25 February 22

    When is the best time to put a large one-off contribution into KiwiSaver – when the fund is falling, or rising?

  • Gravatar for Jay

    3 February 22

    KiwiSaver funds are still dropping and last 2 years with COVID and market, I am loosing money and not gaining. COVID is still going to affect us for years to come. When is the government going to allow us to withdraw before all my money is lost. Can’t use it for first house as the retail market is just for the rich, can’t use it to set up a first business, food and day to day costs increasing. Government not allowing this is it because they handing out lots of money to business (sorry If your a sole trader you don’t get any).

  • Gravatar for Natasha Singh

    20 April 20
    Natasha Singh

    I find it hard to know how much I have lost all I see is my total and there has been a -4.66% return in the my super balanced fund this makes no sense to me all I want to know is how much have I lost as it is disheartening you work years pay super and loose out should just put in savings then don't loose any this is hard even for this to look thousands and to be told hang in there reality is yes it isn't a savings but to some degree it is when you put you money in there and see if just go. Really you guys need to speak plain English I have no clue really what fund to chooe etc implications who holds what

  • Gravatar for

    15 April 20

    I'm turning 65 next year and will possibly be retiring. I may withdraw my kiwisaver or leave it in for a couple of extra years. I was in moderate fund and changed itvto conservative 3 weeks ago. Do you think I made the right move.

  • Gravatar for Rangituaia

    10 April 20

    What am i losing by changing to a conservative/income only fund while the markets are volatile? I am not looking to use ks within next 5years. Cant just swap it back to high risk once things calm down?

  • Gravatar for Oliver Glen

    9 April 20
    Oliver Glen

    The section on the "three questions to help you decide which type of KiwiSaver fund is right for you" is the most informative report that I have seen on the performance of a the complete range of KiwiSaver Funds and is an excellent document to inform investors on making the correct decisions over the future of their KiwiSaver investments. Thank you.

  • Gravatar for

    9 April 20

    Why is kiwisaver still being used for investment when the world is in cova19 " naturally share markets will be down" DONT UNDERSTAND REASON FOR THIS AS KIWISAVERS ARE LOSING.

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