KiwiSaver & retirement

Don’t switch KiwiSaver funds without reading this

7 March 2018
Reading time: 4 minutes


By Tom Hartmann, 20 comments

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.

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.

About the author
Tom Hartmann's photo Tom Hartmann

With a background in journalism and finance, Tom is Sorted’s personal finance lead. He loves the way our anxiety about money reduces when we get things sorted, and how seemingly tiny tweaks deliver big results over time.

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Comments (10)

Comments

  • Tom from Sorted | 22 July 25

    Thanks H – you're on the right track comparing funds for yourself and shopping around. Make sure to check out our KiwiSaver fund finder tool to see how they all add up over time – tens of thousands of dollars – and compare the best deals for you. We can't say regarding your financial adviser, as it's up to you to decide whether they'll bring value for the money you'll spend. Go well!

  • H | 18 July 25

    I was put in touch with a financial advisor who recommended I switch KiwiSaver. He made some valid points (the newer fund meets my requirements e.g. aggressive with high returns long term, ethical/socially responsible investments, better performance than my current provider as per Morningstar report) but it does charge me a higher fee (just over 1% pa) and the financial advisor gets paid 0.25% pa also for giving me ongoing advice.

    Is this wise? Does this mean his advice is likely biased given the commission? There are a couple of other similar options with similar performance/returns with lower fees – should I ditch my FA and contact these directly instead to switch my KiwiSaver over?

  • Tom from Sorted | 15 November 24

    Hi Ray, thanks for commenting. Kiwi-'Saver' is a bit of a misnomer in a way, since it is actually an investment account. Which means that your money is invested in assets like shares and bonds, and it is put at risk so you can reap rewards. Those ups and downs come with the territory, but they are a feature, since it is because of them that you are able to grow your money that much more than a bank savings account. However, when you get nearing the point of needing to withdraw the money to use, you don't want to be seeing those dips and be more sure that the money will be there. In this case, there are more conservative funds and even defensive funds that are more similar to a term deposit (without the time restrictions on withdrawing though). Hope that helps some, but it's important to know that KiwiSaver doesn't work like a savings account that typically only goes up in one direction. For more, see our guide on investment funds.

  • Ray | 15 November 24

    If your kiwisaver goes up to say $109,000 on conservative fund which is at a level of 2.4%.
    My understanding is that Kiwisaver is a savings fund for when you reach retirement age.
    So WHY does it goes down at times when in fact I'm putting in 3% plus employer 3% contribution.
    My view is that it should never go below it's high point.
    Otherwise there should be an option where you tie your contributions with a bank. At least I will know that the investment will never go down.
    It just isn't fair. Especially for people that joined Kiwisaver at an older age.
    Would be interested in comments please

  • Tom from Sorted | 14 October 24

    Thanks Gavin – this is really a question for Westpac as it will vary from provider to provider, so we are unable to say at present.

  • Gavin | 13 October 24

    How long does it take to switch from say a moderate fund to a cash fund is it taken as a snapshot in that moment so you know what you are getting. I find the available info is out of date and lagging up to 7 days, which is very bad when dealing with an investment genre that is time sensitive. All above is relevant to Westpac. Technology available to investors is antiquated.

  • Tom | 1 February 24

    Kia ora Sam, thanks for commenting. Have a look at our KiwiSaver fund finder (under Tools above), which includes a star rating system regarding their services and communications. That should help your decision-making.

  • Sam | 31 January 24

    Is there a list somewhere with KiwiSaver providers ranked by how helpful their customer support is? I have recently separated from my wife, and part of our agreement is that I transfer some of my KiwiSaver into hers. My provider Mercer's support in this has been abysmal to the point where I'm considering to switch schemes and then try again - but I don't want to jump from the frying pan into the fire.

  • Anonymous | 13 May 23

    Should they be allowed to charge a transfer fee if they are losing a customer? It sounds like they then benefit from poor service and performance.

  • Anonymous | 1 May 23

    One key reason for a move not mentioned here is changing to a provider with a better ethos concerning ethical investment. Even better if they have accreditation with external accessors (e.g. RIAA). Interesting, some (not all) of your top picks are also good on ESG ratings.

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