Choosing the Right KiwiSaver Fund for You

It is easy to get stuck and overwhelmed by excessive information. You know you need to join or change funds but end up having a stab in the dark about what provider to use and what type of fund to sign up for. I’m inviting you to relax about choosing ‘the right’ KiwiSaver and will give you an easier way to choose a ‘perfectly fine’ fund.

Please don’t be fazed by KiwiSaver

There is no perfect KiwiSaver provider and fund, but there are plenty who are perfectly adequate! Remember that the fund you choose might suit you today but might not be right for you in five years. That’s fine. Not much stays the same in life; KiwiSaver is no exception. Use the information you have today to make the best choice and review your choice over time.

KiwiSaver starts small and grows with you, at your pace, and all it needs is some money and a lot of time. If you commit to making decent regular contributions to your fund month after month and year after year, you will enjoy a large nest egg at retirement. With employer and government contributions, your stash will grow even larger.

That’s the simple part out of the way.

The confusing part is picking a provider and fund to send your money to.

Navigating the options for picking your KiwiSaver fund

The KiwiSaver business is subject to stringent government oversight, and it’s a lucrative industry for providers to be in. KiwiSaver providers are absolutely in it to make a buck, but for them, it is a delicate balance of making money for you whilst making money from you. 35+ companies offer over 300+ different funds to entice your investing dollar onto their platform, while you, on the other hand, are just trying to pick an investment that gives you the most money when you retire.

Your goals are not necessarily aligned, and with slick marketing campaigns clamoring for your attention, it’s hard to choose a fund.

Plan A: You could pay a (often hefty) fee to an independent advisor to have them select a fund for you, and honestly, that would be the most thorough way to make a choice. They are unlikely to focus solely on KiwiSaver but will help you map out your entire financial life. That would be awesome, but most of us don’t have the ability or the desire to pay for financial advice.

Plan B: You could just ask your mates. Yep. Survey the crowd, so to speak. I want you to ask ten of your friends or acquaintances (whose intelligence you respect) about their KiwiSaver.

Ask this question: “Please, can you tell me what KiwiSaver provider you are with and what fund type you are in?”

You are not looking for a commentary on their fund or their financial point of view. Nor are you being intrusive and asking for their KiwiSaver balance. You are simply after the provider name and the fund name.

To test my theory, I texted ten people I knew with a 100% response rate and a diverse range of funds to follow up on.

Why do this?

Most of us have no reference point to narrow down our choices. By canvassing ten people, you now have some provider names to look into, plus an idea of the different types of funds they offer. It is a place to start.

This is far better than beginning with a KiwiSaver comparison website, which is akin to walking into the Chemist Warehouse: Overwhelming!

Write out a list of your friend’s funds, and then go onto the government-run website Sorted Smart Investor and look each of them up. This website is a database of what’s on offer. You will see information about the mix of investments in the fund, their returns, and the fees they charge. This simple exercise will show that some funds are more expensive than others, and some perform better. Some are new, and others have been around since 2007 when KiwiSaver began. You will begin to see differences and similarities in what they invest in. Pick the ones that stand out as being better, and research them a little more by going directly to the provider’s website.

You might even type “Provider Name review” into Google and see what pops up. Find reviews from independent sources.

Consider a few things when looking at KiwiSaver

1. When do you need this money?

If you are nowhere near 65, you can choose to be in higher growth. This means a bumpier ride in the share market week to week but more money at retirement. You may consider going to a more balanced fund if you are about to retire. Higher risk equals higher returns over time. If you have the time to take higher risks with a KiwiSaver fund, put risk into perspective.

2. What fees are you paying?

The lower the fees, the more money you get to keep invested in your fund. Higher fees don’t mean higher returns.

3. Active or passive?

Are humans actively trying to pick and choose how to make your fund do better (active investment), or is it mainly being left to follow the share market (passive investment)? What’s the difference? Put simply, over time (and your KiwiSaver fund is one of the longest-running assets you will ever manage), humans are not known for outperforming the average returns of a share market. Yet, they will charge high fees to attempt to do so. With few exceptions, low-fee passive funds generally perform better over time.

Fund managers may shake their heads at my “ask your mates” approach

But I’ve seen it work more times than not. And I can’t help but think it is better than just taking an eeny meeny miny moe approach, as many do.

The beauty of KiwiSaver, or any investment, really, is that we have the luxury of changing our minds. Granted, we don’t want to chop and change them too much, but if you signed up with a KiwiSaver provider based on the information that you had at the time, then well done, you made an excellent choice.

But to maximize your fund balance, continue to survey your friends and check in with your KiwiSaver fund occasionally. I continue to write about my KiwiSaver choice and balance on my blog, The Happy Saver because others use me as a reference point. Whenever you hear KiwiSaver mentioned, listen up and continue to take the time to learn. This might cause you to move your KiwiSaver fund to a new provider (something that is extremely easy to do) or stay put.

As the KiwiSaver industry has grown, so have the funds on offer, and I’ve made three changes in the 16 years I’ve been in it. Just yesterday, a friend stopped in for a coffee, and I asked them my two questions. They told me without hesitation, and I’ll check out their provider shortly. It all adds to my understanding of what’s available.

Retirement is a certainty for most of us, and we need KiwiSaver. Therefore, in my view, prioritizing paying a decent amount of money into your KiwiSaver fund from every pay cheque is a no-brainer. Ultimately, it’s your decision which fund you will direct your money to, and you should have complete faith in your ability to make the right decision and choose the appropriate fund.

You’ve got this!

Disclaimer: The information about KiwiSaver funds provided on this blog is for general information only and should not be considered financial advice. PocketSmith is not accountable for any actions or decisions made based on the information presented.

Ruth blogs at thehappysaver.com all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.