Experts are urging investors who haven’t themselves selected the KiwiSaver provider or fund they are invested in to take action and make an informed choice.
Government changes taking effect next July will impact various aspects of the KiwiSaver Scheme, including some that specifically affect those in default funds.
The FMA’s 2020 KiwiSaver Annual Report reveals that around 690,000 Kiwis were placed into conservative default KiwiSaver funds after being automatically enrolled when starting a new job. As of 31 March 2020, 381,034 members had yet to actively decide whether to stay in or switch funds. Among them, 184,524 were contributing members, collectively holding over $4 billion in their accounts.
Earlier this year, the Government announced that from July 2021, funds held in default KiwiSaver accounts would be invested in a balanced fund rather than a conservative fund. This is positive news for investors in default funds, as their money will be allocated to higher-return investments like shares, potentially leading to greater long-term growth. However, some investors may end up in a fund that doesn’t suit their needs. For example, those planning to use their KiwiSaver funds to buy a first home in the next few years may find a balanced fund too volatile for their short-term goals.
“It is important that all KiwiSaver members are in the right KiwiSaver fund for their situation,” said National Capital director, Clive Fernandes. “The longer these members stay in a fund that is not right for them, the more they could lose out on extra returns or expose themselves to unnecessary risk.”
Some members in a default fund may not know how to check who their KiwiSaver provider is. They can find out by looking at their email communications, annual statements, or by logging into the IRD website.Â
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