How the KiwiSaver fund finder works

The KiwiSaver fund finder is an online tool from Sorted to help you select a KiwiSaver fund according to key criteria. It lets you compare different funds’ fees and performance, as well as the services offered by providers. It also helps you decide whether you are in the best KiwiSaver fund for you.

The KiwiSaver fund finder displays data on hundreds of KiwiSaver funds in a simple and standardised format. It provides averages across similar types of funds to allow quick comparisons. The tool also includes a short questionnaire to help you work out how much risk to take.

The tool is for anyone currently in KiwiSaver or thinking about joining. It lets you compare KiwiSaver funds, check the fund you’re currently in, or pick funds for family members, for instance.

It is also essential for anyone wanting to learn about the key criteria for choosing a KiwiSaver fund: the right amount of risk, the fees involved and the services offered. Looking at past performance can be useful too, although it does not predict how a fund will do in the future.

The fund finder data is only from KiwiSaver funds and their providers.

Because it is limited to KiwiSaver, you’ll need to take into account any other significant investments you have outside of KiwiSaver. For example, if you have lots of low-risk bank term deposits, you may want a higher-risk KiwiSaver fund than the tool suggests. Or if you have shares, where the risk level can vary widely, you may want a higher- or lower-risk KiwiSaver fund. If you’re not sure, you might want to seek help from a financial adviser.

Providers of investment offers in New Zealand are required by law to communicate key facts so investors can make informed choices. The data and documents are collected on a central register called Disclose.

The KiwiSaver fund finder takes this information and displays it in a way that’s easy to find, compare and understand.

It also includes information about the services and communications that KiwiSaver providers offer you – based on their responses to our six-monthly provider survey.

Fees are the total cost you can expect to pay in a given fund by the time you retire. Estimates are based on current fee levels, your balance and how long until you retire.

The services percentage is based on weighted responses to the most recent six-monthly provider survey. It refers to how many important customer services a provider offers you.

The returns shown are how the fund performed (after fees and tax) for the five years up to the most recent quarter (31 March, 30 June, 30 September, 31 December). In general, it’s good to look at the longest possible time period when assessing returns.

KiwiSaver providers are required by law to make data publicly available each quarter. The KiwiSaver fund finder will update weekly from the Disclose register, if new information becomes available.

The information on provider services is based on a six-monthly survey.

We’ve grouped KiwiSaver funds based on the proportion of growth assets (shares, commercial property and some derivatives, which tend to be riskier) that they held in the last reporting period.

• Defensive funds held 0% to 9.9% in growth assets.
• Conservative funds held 10% to 34.9% in growth assets.
• Balanced funds held 35% to 62.9% in growth assets.
• Growth funds held 63% to 89.9% in growth assets.
• Aggressive funds held 90% to 100% in growth assets.

Note that these ranges are quite wide for conservative, balanced and growth funds. This can make it tricky to compare funds within a category.

For example, Balanced Fund A might hold just 35% in growth assets, while Balanced Fund B holds 62%. In periods when growth assets perform well, returns for Fund B are likely to be higher just because it holds more growth assets. But if growth assets then perform badly, Fund B is likely to do worse than Fund A.

When comparing the returns of two funds within a fund type, take into account what each fund holds. If you look at the details and actual allocations for different funds in this category, you can find those with the proportion of growth assets you need.

Conservative and balanced funds (and to a lesser extent growth funds) often hold lots of long-term bonds, which carry some risk, too. Bond issuers may not pay back the money. Also, when interest rates rise, the value of bonds goes down over the short term.

For example, if an existing bond is paying 6% interest and new bonds are paying 8%, the 6% bond becomes unattractive and its value falls for a period, although in time it may recover. This can lead to negative returns over the short term in funds holding bonds.

The finder categorises funds based on the actual mix of investments that this fund held in the last reporting period. This mix continually changes because of market swings and managers’ rebalancing, so these percentages are a snapshot. But it will give you a good idea of where your money is being invested.

Because some fund managers vary their investments depending on market conditions, their funds may move from one category to another. For example, the manager of a growth fund may reduce its share holdings for a period, so the finder moves that fund into the balanced category.

Some KiwiSaver funds have names that don’t match our categories of fund types. For example, XYZ KiwiSaver’s Defensive Fund may hold more than 10% growth assets, so we categorise it as a conservative fund. We suggest you think of it as a conservative fund.

The KiwiSaver fund finder includes three questions to help you work out which type to look at. These are based on two things: how much time until you plan to start withdrawing your KiwiSaver money, and your attitude towards risk.

Your answers are scored and you are directed towards one of the five types of funds.

• If you answer 0–3 years to the time question, you go into defensive or conservative, depending on how you answer the other two questions.
• If you answer 4–9 years, you go into defensive, conservative or balanced, depending on how you answer the other two questions.
• If you answer 10 years or more, you go into defensive, conservative, balanced, growth or aggressive, depending on how you answer the other two questions.

This means that no one, even a risk lover, is directed to anything riskier than conservative for less than 3 years, or anything riskier than balanced for less than 10 years.

You can check that the type of fund really looks best for your circumstances.

Defensive funds are generally suitable if you:

• Don’t want your KiwiSaver balance to ever go down (although there are no guarantees), even though that means your balance almost certainly won’t grow as much, over the long term, as accounts in riskier funds
• Expect to spend your KiwiSaver money in the next three years

Conservative funds are generally suitable if you:

• Are willing to take on some ups and downs in value, and are seeking average long-term returns a bit higher than in a defensive fund but probably not as high as in riskier funds
• Expect to spend your KiwiSaver money in the next two to six years

Balanced funds are generally suitable if you:

• Are middle of the road, comfortable with seeing your account value sometimes fall a little and seeking mid-range long-term returns
• Expect to spend your KiwiSaver money within the next 5 to 12 years

Growth funds are generally suitable if you:

• Are looking for fairly high growth over the long term, and won’t want to switch to a lower-risk fund whenever you see your account balance fall quite a lot
• Intend to leave your money in KiwiSaver for at least 10 years

Aggressive funds are generally suitable if you:

• Are looking for strong long-term growth, knowing you will stick with your fund even when your balance falls fast
• Intend to leave your money in KiwiSaver for at least 10 years

A note for those wanting low risk: If you would panic if your KiwiSaver account balance fell, a defensive fund may work best for you. However, in a defensive fund there’s a different type of risk – that you may not have as much money for your future goals. Your account sometimes won’t grow as fast as inflation, so the buying power of your investments could fall over time. In a defensive fund you may need to invest more each year to reach a savings goal than you would in a higher-risk fund.

Here at Sorted we would recommend picking a fund that:

• Has the right level of risk for you
• Charges reasonable fees
• Offers the kinds of services you want
• Hasn’t performed badly compared with similar funds (although this is no guarantee that any level of performance will continue)

We recommend basing your decision on those criteria, in that order of importance. The KiwiSaver fund finder has been designed with this hierarchy in mind, to enable you to do precisely that.

There are lots of other criteria you could use to choose your KiwiSaver, such as a familiar brand or the convenience of your local bank. But to get the most out of KiwiSaver, we suggest that you consider the above four factors instead.

You may need the exact name of your KiwiSaver fund to find it. Because there are so many, knowing your provider or scheme name may not be enough. If you’re not sure, check statements you’ve received or phone or email your provider.

You can belong to only one KiwiSaver scheme at a time, but most providers will let you invest in more than one of their funds. Close to retirement you might, for example, put money you plan to spend in the next few years in a conservative or defensive fund, and money you plan to spend later in a riskier fund. You can choose a provider that offers the flexibility you want.

The level of fees you pay can make a big difference to the amount you have when you retire. This is especially true if you are in KiwiSaver for many years. It pays to keep a close eye on how fees add up.

KiwiSaver fees are one area where it’s not necessarily true that ‘you get what you pay for’.

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, while 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.

You’re right. Returns show how a KiwiSaver fund has performed in the past, but they do not predict future performance. So it’s important not to switch funds based largely on past returns. However, if you see consistently poor returns while comparing KiwiSaver funds, it may be a sign of poor management.

In general, it’s good to look at the longest possible time period when weighing up returns. After all, with retirement savings, it’s the long game that counts. And short-term returns can be all over the place.

Our choice of five years means we can include most KiwiSaver funds, although we have to exclude newer funds until they have a five-year record.

with five years of information, no one can be sure that any trend is likely to continue. If good performance is partly the result of low fees, that may continue as long as the fees stay low.

But if high returns are the result of investment strategy, research shows there is some tendency for previous good performers to do worse than average in the future. This may be because winning funds tend to be riskier, so they have big ups and big downs.

All returns shown are after fees and tax. This is good to keep in mind when comparing KiwiSaver returns with other investments – such as advertised term deposit rates, which are typically shown before tax.

We chose to show after-tax KiwiSaver fund returns because they show how much money you will actually get in your account.

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.

If a particular service matters to you, check whether your provider offers it by reading their website, or phoning or emailing them.

We survey KiwiSaver providers on how many different ways they help their members with investment options, communicate with members, and the extra services they offer. So this rating is more about the quantity rather than the quality of services.

The survey responses are collected and weighted, as some service features are more significant than others. For services that are particularly important, or that most providers are not likely to do, such as proactively contacting members to remind them to get the government contribution, more points are awarded. Each provider is then scored accordingly.

Our provider survey measures how many services providers offer in three categories:

• Help with investment options: online calculators, information for people at different life stages, advice before and during retirement
• Communications to members: flexibility on how you receive balance and other information and how often, call centre availability, newsletters
• Extra services: help with maximising tax credits, transferring from abroad, etc

It’s easy to switch but it’s not always wise. There are two ways of switching with KiwiSaver: staying with your provider but moving to one of their other funds, or moving to a new provider.

Some bad reasons to switch:

• You’ve read or heard that another fund has been making higher returns than yours – especially if it’s just short-term returns. If you’re chasing a rate, you’re chasing something that’s already gone.
• A new fund has been recommended to you, but the recommendation came from someone who is rewarded if you transfer. Ask questions about this.

Hundreds of thousands of people are in a default KiwiSaver fund – one of the government-selected funds that new KiwiSaver members are put into when they start, unless they choose a different fund or their employer has chosen a scheme. If you are in a default fund, with the KiwiSaver fund finder you now have an opportunity to make an informed choice about where your savings will be invested.

The dials run from an almost-empty circle, which means 0%, to a full circle, which is the highest result any fund of that type got during that period. You can also easily compare with the average for that fund type in grey.

The ‘5-year data not available yet’ message means the returns could not be calculated for that reason. Some funds have not been in existence for five years, for example, and therefore will not have data yet.

The averages shown are the mean averages, which is why they are not always at exactly the half-circle mark (which would be the median).

Certainly.

KiwiSaver fund finder was developed by a project team that included KiwiSaver experts such as columnist Mary Holm, Sorted’s actuaries Melville Jessup Weaver, designers and developers from Toast Digital, and the Sorted team.

The material was widely reviewed and received a range of input from KiwiSaver providers and other industry experts.

Let us know at office@sorted.org.nz.

The KiwiSaver fund finder is based on fund data from providers, and we assume that they have accurately disclosed data for each of their funds, as well as for the services and communications that they offer.

By law, most providers are required to disclose data for each of their funds and make it publicly available on their websites. Sorted takes the data, checks for anything irregular, and displays it in the fund finder so Kiwis can make comparisons.

The Sorted KiwiSaver fund finder is brought to you by Te Ara Ahunga Ora Retirement Commission. We are an autonomous crown entity that is government funded and independent of any KiwiSaver provider, dedicated to helping New Zealanders manage their personal finances throughout life. We hope the Sorted KiwiSaver fund finder will help you make well-informed decisions about how best to manage your finances and to plan for your future. You can find out more about what we do and why on the Commission’s website.