The sharemarket is going up and down again; in other words, it’s back to normal. But seeing your KiwiSaver balance go down for the first time in a while can be downright unnerving.

It’s important to not panic and jump ship, especially if the boat is just riding a wave down and will eventually sail up again. Once you bail, you miss out on the eventual recovery.

If you’ve been contemplating a switch for other reasons, here are some considerations.

It’s easy to switch between KiwiSaver options, and there are two ways to do it. You can either move to an entirely different KiwiSaver provider altogether and pick one of the funds they offer, or you can stay with the same provider and change to one of their other KiwiSaver funds.

Either way, one of the best ways to compare all your options in the market, or even just those your provider offers, is by using Sorted’s KiwiSaver fund finder.

Changing providers

These may be good reasons to move to a new KiwiSaver provider:

  • If it charges lower fees on funds with the same level of risk.
  • If it offers better services and clearer communications with its members.
  • If your current provider consistently makes returns well below average over the long term. (But don’t choose a new KiwiSaver provider solely on high returns, which will go up and down. Base your decision on their investment options, fees and services.)

On the other hand, these may be bad reasons to jump ship:

  • If you’ve read or heard that some other provider’s funds have been making higher returns than your current fund – especially if it’s just short-term returns.
  • If a new provider has been recommended to you, but the recommendation came from someone who is rewarded if you transfer (like a bank or an adviser). Ask questions about this.
  • If you’re being pressured to switch over to your bank. A familiar brand isn’t necessarily a good reason to shift.

Always check whether the new provider’s fees, services and investment options suit you as well as your current scheme does.

If you do decide to change KiwiSaver providers, simply complete a membership form for the new one. They will tell Inland Revenue and arrange for your funds to be transferred, which typically takes between 10 and 35 days.

Some providers charge a transfer fee to move out of their scheme: Aon ($35) and Booster ($30).

Changing funds with your current provider

Stick with the same provider, but choose a different fund – here are some good reasons to head down this route:

  • If you decide you can handle more ups and downs and you want the potentially higher returns of a riskier fund.
  • If your fund’s ups and downs worry you too much and you’re thinking about moving to a lower-risk fund.
  • If you’re getting close to retirement, or planning to withdraw funds for a first home, and want to move to a lower-risk fund to reduce the chances that your balance will drop right before you need the money to spend.
  • If you’ve read that another of your provider’s funds has been making higher returns than your current fund. Again, the returns are like waves: they don’t typically stay still, and you could be chasing something that’s already gone.

A bad reason to change KiwiSaver funds would be:

  • If you’ve read that another of your provider’s funds has been making higher returns than your current fund. Again, the returns are like waves: they don’t typically stay still, and you could be chasing something that’s already gone.

Keep in mind that some KiwiSaver providers let you invest in more than one of their funds, so you could spread your contributions across multiple funds with different risk levels. But by doing this you are creating your own asset mix between funds, and it may be simpler to just find a fund that already has a mix that’s right for you without doing the blending yourself.

The other thing to remember is that some providers have “life stages” options that adjust your investment mix automatically as you age, either by altering the fund you’re in or distributing your money between funds of various risk levels.

The point is, switching isn’t always the best choice, but for many it can be just the thing. Before you do, though, have a think first.

Comments (5)

Gravatar for

1:03pm | 2 Jun 2019

Why is money always dropping. One day you look at your balance then boom few hundred goes maybe $2000 a year

Gravatar for Sharon

Sharon

3:33pm | 22 Jan 2019

I'm 64 and am getting freaked out by losses. I don't want my balance to go up by less than I am putting in. I have been thinking bout going with a safe option rather than a mixed risk/return. Needing some advice really as I' undecided.

Gravatar for Nick

Nick

4:52pm | 18 May 2018

I am retired and have long since stopped contributing to my Kiwisaver account. I am considering switching my funds from my original provider to one that charges lower fees. Is this the time to move to a non-Kiwisaver fund (at the equivalent risk level) ? What are the advantages of this? How do I choose out of a seemingly endless list of alternatives without engaging a financial adviser?

Gravatar for Jason Frick

Jason Frick

12:55am | 14 Mar 2018

I wish sorted would just tell everyone what the evidence says: low fee passive funds are the best bet over the long term. In NZ, that means simplicity.
The govt really needs to take action on default funds - time for some harder regulation. These fees are ridiculous.

Gravatar for Martin Jago

Martin Jago

2:23pm | 9 Mar 2018

Education tip- switching managers and funds.
If you're thinking about switching providers, managers or funds, it should be for the right reasons. Poor performance on a short term basis is NOT one of those reasons and will eventually cost you a lot of money if it's a change driver. Human nature compels us to jump from what we perceive as being low quality, to what looks as if it should be high quality. However, when you see a manager or fund has performed well, you must remember, "that was yesterday, and yesterday's gone". Jumping from low to high places you in the same position each time, the only way is down. Studies have shown this costs investors on average 2.7% p.a. from their annual returns (US survey). So, DON'T chase returns or "star" managers.

Whilst changes are sometimes warranted, if you've decided on an investment STRATEGY, rather than a particular manager or fund, you're more likely to succeed. Decide HOW you want your money managed. Do you want one manager to be responsible for your lifelong outcome or would you prefer a multi-manager strategy? Do you prefer passive, active, index investments, or do you think a mix of styles is best? Then, take the time to determine your risk profile. This last eight years has been a great time for aggressive/growth investors as we've had bull markets everywhere. But that can't go on forever, what goes up will come down in the markets over short periods. Will you be able to sleep soundly through the Bear market when 10-20% of your funds disappear?

If you're thinking of a KiwiSaver change, or just wondering what your best strategy should be, do your homework. The chances are your account will be worth hundreds of thousands of dollars at some point and a strategy, rather than checking and changing managers and funds, will secure you the best outcome. You WILL need an independent financial adviser for this. Only they can tell you about all your alternatives. Your current provider, or any adviser working for a provider, will ONLY tell you about THEIR products. So, talk to an independent adviser. You may need to pay for a report. But if that saves you tens of thousands of dollars at retirement, it's peanuts compared to the benefits. Any questions, come back to me, I'd love to help.