Are You in the Right KiwiSaver Fund for Your Situation?
Most people join KiwiSaver and then rarely think about it again.
You may have been enrolled automatically when you started a job, chosen a provider years ago, or simply stayed with the fund you were originally placed into.
But your KiwiSaver is a long-term investment, and the fund you are in can have a meaningful impact on how your savings behave over time.
The right KiwiSaver fund is not necessarily the fund with the highest recent return or the one your friends and family use. It should reflect your goals, your timeframe and how comfortable you are with investment risk.
So, is your current KiwiSaver fund still the right fit for you?
How Did You Choose Your KiwiSaver Fund?
It is a simple question, but many New Zealanders may struggle to answer it.
Perhaps you:
- Stayed with the provider you were automatically enrolled with
- Chose the same provider as a family member
- Selected a fund based on past performance
- Picked an option without fully understanding the differences
- Have never reviewed your KiwiSaver since joining
There is nothing unusual about that.
However, as your balance grows and your circumstances change, it becomes increasingly important to understand where your KiwiSaver money is invested and whether that approach still suits you.
What Are the Different Types of KiwiSaver Funds?
KiwiSaver providers generally offer a range of funds with different mixes of investments.
At a broad level, you may come across options such as:
Conservative funds
These usually hold a greater proportion of lower-risk assets, such as cash and fixed interest investments. They may experience less short-term movement, but generally have lower long-term growth potential.
Balanced funds
These typically combine growth assets, such as shares and property, with more defensive investments. They sit somewhere between conservative and growth-focused options.
Growth or aggressive funds
These generally invest a larger proportion in growth assets. They may offer greater potential for long-term growth, but they can also experience larger rises and falls along the way.
There is no fund category that is automatically “best”.
The important question is whether the investment approach matches what you are trying to achieve and when you expect to need the money.
Your Timeframe Matters
One of the most important considerations when choosing a KiwiSaver fund is how long your money is likely to remain invested.
Someone in their twenties who expects to leave their KiwiSaver invested for several decades may have a very different timeframe from someone planning to use their KiwiSaver for a first-home deposit in the next couple of years.
Similarly, someone approaching retirement may want to review whether the level of investment risk they took earlier in life still suits their current plans.
Your timeframe can influence how much short-term investment movement you may be comfortable accepting.
This is one of the reasons KiwiSaver should not simply be treated as something you set up once and forget about.
Consider How Comfortable You Are With Risk
Investment markets move up and down.
If your KiwiSaver balance fell significantly during a market downturn, how would you respond?
Would you be comfortable leaving your investment alone and allowing markets time to recover, or would seeing your balance fall make you want to move into a lower-risk fund?
Understanding your own response to investment volatility matters.
A fund that looks suitable on paper may not be right for you if the level of movement causes you to make emotional decisions when markets become unsettled.
A KiwiSaver adviser can help you consider both your financial circumstances and your personal attitude towards risk when reviewing your options.
Are You Saving for Your First Home?
For many New Zealanders, KiwiSaver is not only about retirement.
Eligible members may also be able to withdraw most of their KiwiSaver savings to help purchase their first home.
If buying your first home is getting closer, your investment timeframe becomes particularly important.
For example, the level of risk that made sense when your first-home purchase was eight years away may not necessarily be appropriate when you expect to need the money within the next year or two.
If home ownership is one of your goals, you can read more about using KiwiSaver for your first home and how the scheme can fit into your wider financial plans.
Your Contribution Rate Matters Too
Choosing an appropriate fund is only one part of your KiwiSaver strategy.
You should also understand how much you are contributing.
Employees can generally choose from several KiwiSaver employee contribution rates, and your contribution level can make a significant difference to the amount you accumulate over the long term.
The right contribution rate will depend on factors such as:
- Your income
- Your household expenses
- Your short-term financial commitments
- Your retirement goals
- Your wider savings and investments
Increasing your contribution rate may help build your balance faster, but it still needs to work within your household budget.
The best approach is usually one that you can sustain over time.
Do You Know What Fees You Are Paying?
Fees are another factor worth considering when reviewing KiwiSaver.
Providers and funds can charge different fees, and because KiwiSaver is generally a long-term investment, even relatively small differences can add up over many years.
However, fees should not be considered in isolation.
The cheapest fund is not automatically the most appropriate fund, just as the fund with the highest recent return is not automatically the best choice.
The investment strategy, level of risk, service provided, fees and your personal goals should all be considered together.
Past Performance Is Not the Whole Story
It can be tempting to compare KiwiSaver providers based on which fund has performed best recently.
But investment performance changes over time.
A fund that performed strongly last year may not perform the same way next year, and short-term results do not necessarily tell you whether a fund is appropriate for your long-term circumstances.
When comparing KiwiSaver funds, it is generally more useful to look at the bigger picture.
Consider:
- The fund’s investment strategy
- Its level of risk
- Your investment timeframe
- Fees
- Your financial goals
- How the fund fits into your wider financial situation
When Should You Review Your KiwiSaver?
There is no need to change your KiwiSaver fund simply because markets move or another provider has had a strong year.
However, there are certain times when reviewing your KiwiSaver can be worthwhile.
These include when you:
- Start a new job
- Receive a significant change in income
- Begin planning to buy your first home
- Get married or start a family
- Become self-employed
- Move closer to retirement
- Experience a major change in your financial circumstances
- Realise you do not know what fund you are currently invested in
Even if nothing major has changed, periodically reviewing your KiwiSaver can help make sure your current strategy continues to reflect your goals.
Halo Advisers also recommends ongoing reviews as circumstances evolve, rather than treating KiwiSaver as a one-time decision.
When Should You Review Your KiwiSaver?
There is no need to change your KiwiSaver fund simply because markets move or another provider has had a strong year.
However, there are certain times when reviewing your KiwiSaver can be worthwhile.
These include when you:
- Start a new job
- Receive a significant change in income
- Begin planning to buy your first home
- Get married or start a family
- Become self-employed
- Move closer to retirement
- Experience a major change in your financial circumstances
- Realise you do not know what fund you are currently invested in
Even if nothing major has changed, periodically reviewing your KiwiSaver can help make sure your current strategy continues to reflect your goals.
Halo Advisers also recommends ongoing reviews as circumstances evolve, rather than treating KiwiSaver as a one-time decision.
Getting KiwiSaver Advice
KiwiSaver does not need to be complicated.
At Halo Advisers, we start by understanding your goals, timeframe and comfort with investment risk before considering which KiwiSaver options may suit your circumstances.
Halo Advisers currently provides advice across a selected range of KiwiSaver providers, including Generate, Milford, Booster, Pathfinder, Fisher Funds and Kōura.
Whether you are saving for your first home, building towards retirement or simply wondering whether the KiwiSaver fund you chose years ago is still right for you, a review can give you a clearer understanding of where you stand.
You can learn more about KiwiSaver advice with Halo Advisers or contact the Halo Advisers team to discuss your situation.
The goal is not to constantly change your KiwiSaver.