The default funds are conservatively invested with the majority of the money invested into bonds and cash-like investments which over longer periods of time tend to have a lower return than balanced or growth funds which invest more in property and shares.
Conservative funds are typically seen as appropriate for those with less than 10 years until retirement and people saving up to buy their first home.
But savers with more than 10 years to retirement may be limiting how much they can accumulate for their golden years by staying conservative.
Morningstar data shows based on average returns for the sector a worker currently earning the average wage of $55,224 who invested in a conservative fund would have $39,731 as of the end of May after tax.
But if they had invested in a growth fund that same person would potentially have $45,354 based on the average return from the sector.
Projecting the potential returns to the age of 65 shows an even bigger difference.
Using a calculator from a KiwiSaver provider showed the same worker would potentially have $219,182 if they were in a conservative fund or $292,394 if they were a growth fund by age 65 over 40 years of saving.
Chris Douglas, director manager research ratings for Morningstar said those sitting in the conservative category with a long time until retirement were missing out.
"This is only over 10 years. If you extrapolate that over 20, 30 or 40 years of saving you are going to be getting a difference of $20k or more."
Douglas said one of the biggest obstacles to people moving out of conservative funds was lack of confidence in the financial markets.
"We have still got a relatively low level of financial literacy in New Zealand."
He urged savers to think about how long they had before they would need access to their money and to get advice.
"There is a lot of places people can go to for advice."
Donna Nicolof, head of wealth and private banking at the BNZ, said making an active choice on which fund to choose was very simple and only took a couple of minutes.
Both the sorted.org.nz website and providers have questionnaires on them which will help a person figure out what sort of fund they should be in.
Investors can then either switch online with their provider or by contacting their provider directly.
Nicolof said the level of apathy among people concerned her.
"We have got people in conservative funds just starting a new job at 21 or 22."
While they might be saving for a first home others would not be.
"The risk is they will not have enough money to live off in retirement."
Nicolof said providers were putting in a lot of effort to get people to make an active choice on their fund but it was difficult to engage people on a decision that would affect their lifestyle such a long time into the future.
But she urged people to make an active choice.
"The earlier you make those choices the better off you will be in the long term."
