Switching KiwiSaver Funds
Thinking about moving KiwiSaver funds? We explain what to consider and think about before making this important decision
Updated 12 September 2024
Know this first: KiwiSaver is a crucial investment decision and not one to rush. Contributing 6% per year of your salary until you retire adds up to a lot of money, and for many New Zealanders, it's their only retirement saving plan. If you're in a fund that you think is under-performing, or don't feel engaged with the provider, switching to a new scheme can give you more incentive to keep contributing rather than lose interest and take a long-term savings suspension (contributions holiday).
We have published this guide to outline why you should and shouldn't move KiwiSaver, and link in specific resources to help you choose a fund that's right for you.
Know this first: KiwiSaver is a crucial investment decision and not one to rush. Contributing 6% per year of your salary until you retire adds up to a lot of money, and for many New Zealanders, it's their only retirement saving plan. If you're in a fund that you think is under-performing, or don't feel engaged with the provider, switching to a new scheme can give you more incentive to keep contributing rather than lose interest and take a long-term savings suspension (contributions holiday).
We have published this guide to outline why you should and shouldn't move KiwiSaver, and link in specific resources to help you choose a fund that's right for you.
Why should I switch my KiwiSaver?
There are five main reasons to change funds or schemes:
- Save on fund fees – KiwiSaver scheme fees are widely discussed but rarely understood. In short, low-fee schemes invest in indexes which are cheap to operate. Higher-fee schemes employ specialist managers who buy and sell shares meaning more costs that need to be paid by the investors, i.e. you. Simplicity, for example, promotes that low-fee index funds out-perform high-fee funds in the longer term. If you are convinced of that, switching makes sense.
- Save on commission fees – if you’ve signed up to KiwiSaver via an advisor, it’s quite probable you’re paying around 0.30% or even 0.50% a year to the advisor via the scheme manager. If you had a balance of $20,000, that’s around $100 a year.
- Enjoy better returns – it’s impossible to predict future returns, but several tools measure past performance and are 100% independent. Our go-to guide is the quarterly Morningstar KiwiSaver report. Other resources includes Sorted’s Fund Finder.
- Adjust your risk level – If you’re close to retirement, moving your fund to a low-risk fund can be an ideal way to protect your savings.
- Move to a scheme that offers a fund you want to invest in – for example, if you want to invest in an aggressive fund but your scheme doesn't offer one, this is a valid reason to switch funds.
Potentially bad reasons to switch your KiwiSaver:
Sometimes switching isn't in your best interests, and any decision should be made carefully. Some 'bad' reasons can include:
- Pressure from a bank to move – Banks make a lot of money from KiwiSaver, and if you are applying for a mortgage, you may be asked to move your KiwiSaver to the bank. This is not compulsory, and switching to a bank fund may cost you significantly in the long run given they often have higher-than-average fees compared to low-cost KiwiSaver schemes. If you want independent advice on mortgages and KiwiSaver, contact a trusted mortgage broker.
- Short term returns – Almost all KiwiSaver schemes promote their most recent returns, with one-year performance as popular example. These results may be better than your existing fund, but what's important is looking at long-term results. Our how to choose a KiwiSaver fund explains how to read a Morningstar table, which offers the most accurate fund reporting over the long-term.
- A sales pitch – financial advisors and third party agents, including comparison websites, may push a particular KiwiSaver scheme or fund because they're paid if you switch. Always challenge the reasons behind any sales pitch you hear.
Know this: Many KiwiSaver funds offer decreased risk as you get older (so you don't need to think about what fund is 'right')
There are several funds which invest your KiwiSaver money based on your age. One example is Fisher Funds, which offers a "GlidePath" aged-based platform, whereby you invest in a set portion into one, two or three funds based on your age bracket (0-39, 40-49 etc.). This is designed to grow your investment aggressively while you are young, and protect your money with more conservative assets like term deposits as you get older. Fisher isn't the only scheme to offer such a service; Koura Wealth KiwiSaver and Lifestages KiwiSaver are others.
Do you have experience with switching KiwiSaver funds that you'd like to share? Email our research team today.