People are being encouraged to shop around for a KiwiSaver provider. Photo / Getty Images
Experts are urging people to shop around for the best deals for their KiwiSaver accounts and be more active in overseeing their investments, saying it could make a huge difference in returns in the long-term.
The advice comes as new figures reveal banks manage twice as many KiwiSaver accounts as other providers.
Latest figures from the Financial Markets Authority show banks have two million KiwiSaver members compared to about one million managed by other providers.
There are 29 registered KiwiSaver providers open to the public. AMP, Booster and Fisher Funds are the three largest non-bank providers.
Data shows 3,026,024 KiwiSaver members have $62 billion in funds under management in March 2020 - up from $57b the year before.
Consumers are being encouraged to compare performance rates and hidden costs in order to squeeze the most out of their retirement funds.
An FMA spokesman said it would like to see more KiwiSaver members take greater interest in their investments and make informed decisions.
"This includes joining KiwiSaver early and being in the right fund [according to your risk appetite and financial goals]. Advisers and providers have an important role in this work."
The authority was also focused on ensuring that provider fees showed value for money, encouraging members in default schemes to make active decisions, and encouraging non-contributors to consider making regular contributions, he said.
Commission for Financial Capability personal finance lead Tom Hartmann said it was easy to understand why people took shortcuts with their KiwiSaver but mindsets needed to change.
People often stuck with banks because of the familiarity and the convenience of seeing all their balances stacked up beside each other, he said.
But there were tools online including the KiwiSaver Fund Finder and Smart Investor which compared all the funds in the market.
"This enables people to narrow down their choices. We built these comparison engines in order to help them make much better decisions on how to pick a KiwiSaver fund.
"We can't really predict future performance based on what was done in the past but if a fund has really performed below all other funds of the same type, for long periods of time, it's usually a sign that it's not run very well."
In his view, the most important aspects to consider were the types of funds - like balanced funds, growth funds, conservative funds and aggressive or defensive funds - to suit your circumstances. And then the fees.
"We actually pay hundreds of dollars a year typically on fees. But it gets taken out behind the scenes so we never get a bill for it and this is why it is important to pay attention to them."
Changing providers was also as easy as switching your broadband provider - and making a bad decision would not be the end of the world.
"If you get it wrong and move to a dud you will not be throwing away all your savings. You would basically just switch out of it and that is not hard to do. You contact the provider you want to move to and they do the rest."
Chris Rapson, owner of Rapson Loans and Finance, said unfortunately a lot of New Zealanders were totally passive about their KiwiSaver and "they're quite happy to leave it up to someone else to do it for them".
"In reality, you are doing yourself a disservice."
He favoured people getting professional advice and said, "You had less time to catch up as you neared retirement".
"You want to get a good return and be on the right regime so you can maximise savings and benefits."
If you can get $2000 more a year in income on your KiwiSaver when it comes to retirement, that can be $100,000, he said.
An ANZ spokeswoman said it was the largest KiwiSaver scheme provider with more than 730,000 customers.
"For context, one in three New Zealanders bank with ANZ."
She said ANZ Investments has received high ratings and awards from independent research companies.
"We won New Zealand Fund Manager of the Year and KiwiSaver Fund Manager of the Year at the Morningstar Awards 2020. KiwiSaver is a long-term savings initiative designed to help people save for retirement.
"Starting early, keeping up contributions and taking advantage of the benefits can help people grow a sizeable nest egg for retirement."
Kiwi Wealth retail and product general manager Melissa Vasta said for many people KiwiSaver was their primary investment vehicle outside of homeownership.
"It is great for a couple of reasons. Firstly, it assists people getting into their first home which, with the housing market as it is these days, is exactly the type of assistance first home buyers need. Secondly, it was created to save for retirement. It helps you take control of your retirement goals and plan for the kind of future you want."
She said it was important to choose a provider that works for you and more importantly to make sure you are in the right fund for your age and stage in life.
Online KiwiSaver Tools
* KiwiSaver Fund Finder providers offer hundreds of funds. How do they compare?
* KiwiSaver fees calculator. Forecast what you're likely to be charged in KiwiSaver fees in various funds.
* KiwiSaver savings calculator. How big could my KiwiSaver balance be?
Matt Cowley, CEO Tauranga Chamber of Commerce
How did you choose your KiwiSaver provider?
"Filled in the Sorted.co.nz online quiz, which compares fees and returns. The key thing for me was mobile app access and reporting."
How did you choose which fund to go with?
"The Sorted.co.nz online quiz, which questioned me on my goals and appetite for risk and rewards."
Have you made any changes? Why?/Why not?
"I've changed twice. First was to a different provider because reporting was periodic and access wasn't easy. Second change was reducing to a lower risk fund when I was hoping to withdraw it to buy a house."
Mark Lister, head of private wealth research at Craigs Investment Partners
How did you choose your KiwiSaver provider?
"I'm invested in the Craigs KiwiSaver scheme, which is run by the company I work for because in my view it's far and away the most flexible one in the market."
How did you choose which fund to go with?
"The Craigs KiwiSaver scheme allows me to create my own portfolio from a list of about 200 shares, funds and ETFs from around the world. I've got about 25 holdings in mine, mostly individual shares like Amazon and Disney in the US, Mainfreight and Port of Tauranga. Because my portfolio is 100 per cent shares, it is comparable to a 'high growth' fund. I've got more than 20 years until retirement, so with that sort of investment time horizon I can afford to ride out any ups and downs in the market and simply go for the highest long-term return prospects."
Have you made any changes? Why?/Why not?
"I make changes about once every six months, usually to change the companies and funds I'm directing money into, rather than the sell any existing holdings down. At the beginning of this year we adopted a more positive view on the European market, so I redirected a percentage of my savings into a couple of European companies and UK investment trusts. I'll probably leave that in place for most of this year, unless market conditions change, in which case I'll review it and make some changes."
Nigel Tutt, Priority One chief executive
How did you choose your KiwiSaver provider?
"Craigs are a great local company."
How did you choose which fund to go with?
"Happy to take more risk given the amount of time."
Have you made any changes? Why?/Why not?
"No, and I'm wary of not panicking during uncertain times."
Graeme Leigh, The Mortgage Centre Rotorua
How did you choose your KiwiSaver provider?
"From research results on fund performances."
How did you choose which fund to go with?
"I completed a Risk Profile questionnaire which told my investor 'personality'."
Have you made any changes? Why?/Why not?
"No changes. Haven't seen a need to change as profile remains the same and fund performance has remained solid."
"Before, you had no limitations ... and all of a sudden there’s a handbrake on."