Stuck in a default KiwiSaver fund? It may be costing you.

What a KiwiSaver default fund actually is 

When you join KiwiSaver and you don't pick a fund yourself, Inland Revenue pops you into one of six default funds run by government-appointed providers. Since December 2021, every default fund has to be a balanced fund. That means your money is spread across a mix of riskier growth assets like shares and property, and steadier income assets like bonds and cash. 

Balanced is a sensible middle setting. It rides with fewer bumps than a growth fund, and it tends to build up more over the long run than a conservative fund. Default funds also come with low fees, and they steer clear of investing in things like fossil fuel production and certain weapons, which many people aren't comfortable with. So a default fund is a perfectly respectable place to be. 

So have you actually lost money? 

Over a few years, markets go up and down, sometimes sharply. If you happened to check your balance right after a wobble, you might have seen it dip. That’s completely normal, and it isn’t the same as losing money. Unless you pulled everything out at the bottom, those dips tend to recover in time. 

What’s worth asking is a slightly different question, and that’s whether a balanced fund was the right setting for you. If you’re decades away from touching your KiwiSaver, a balanced fund may have been more cautious than it needed to be. 

What it might have cost you 

Here’s where it gets interesting. If you’re young and saving for a retirement that’s a long way off, a growth fund often does more of the heavy lifting over time. The gap between balanced and growth might look small in any single year, but across the decades it can add up to a meaningful chunk of your final nest egg, thanks to the way returns compound on top of each other. 

For example, in our KiwiSaver calculator you can see that a 25-year-old KiwiSaver investor earning $70,000 with a $2000 balance after five years would have an estimated:  

• $26,332 in a balanced fund 
• $27,032 in a growth fund 

That’s a difference of $700 dollars over 5 years, which is not nothing. But left over 40 years, that difference could become $77,000: 

• $345,000 in a balanced fund 
• $422,000 in a growth fund 

So the earlier you can get into the right type of fund for you, the better.  

On the flip side, if you’re saving to buy your first home in the next year or two, that default balanced fund might actually be carrying more ups and downs than you want. You may be looking for a conservative or defensive fund.  

The point isn’t that default is bad. It’s that default is a starting point, not a decision. And the good news is that you get to make that decision whenever you like. 

The default KiwiSaver funds 

There are six default KiwiSaver funds, each run by a government-appointed provider. You can look every one of them up on Sorted’s Smart Investor to compare their fees, returns and what they hold: 

• BNZ KiwiSaver Default Fund
• Booster Default Saver Fund 
• Westpac Default Balanced Fund 
• Fisher Funds Default Fund
• Simplicity Default Fund 
• Smartshares SuperLife Default Fund 

How to switch your KiwiSaver fund 

Looking for something that suits you better? Switching is free, and it’s simpler than most people expect. Here’s how it goes: 

1. Work out the right type of fund, with the right level of risk, for you. Use our KiwiSaver fund finder to see whether defensive, conservative, balanced, growth or aggressive best fits your timeframe and how you feel about risk. 
2. Compare funds of that type. On Smart Investor you can line funds up side by side and sort them by fees and past results. 
3. Pick your fund and provider. You can move to a different fund with your current provider, or switch to a new provider altogether. 
4. Apply with the new provider. You usually just need your IRD number and a form of ID. Online forms tend to take about 15 minutes or so. 
5. Let your provider do the rest. Your new provider sorts the transfer with your old one. You don’t need to tell your employer or Inland Revenue. Your balance, your years in KiwiSaver and your government contributions all come with you, and the move usually takes a couple of weeks. 

So if you’ve been in a default fund for a few years, take it as good news that you’ve been quietly saving in a solid, low-cost fund the whole time.  

Now’s a great moment to check whether it’s still the right fit. A few minutes on our KiwiSaver fund finder could turn out to be one of the most valuable things you do for your future self this year.