More than two million people have joined KiwiSaver, but KiwiSaver expert Binu Paul says many people are a bit confused about how the savings scheme works.
He is the founder of SavvyKiwi, an app that allows people to manage their KiwiSaver account.
So this week Newshub is looking at some of the myths and misunderstandings about KiwiSaver.
Binu Paul says your balance at any point in time is the result of several factors. There is your contribution, your employer's contribution (if you are a salaried employee), the annual tax credit of up to $521 from the Government, and the gains or losses your manager makes from investing your money.
The fund might go up in value one year even though your manager has under-performed when compared to other similar funds. Your manager may have lost money in a particular year, but that has been offset by the additional contributions that have gone into the fund.
Instead of just looking at the balance of your KiwiSaver fund, you also need to look at the investment performance of the fund itself. The various KiwiSaver funds publish their monthly, quarterly or annual performance results.
No. Mr Paul says when talking about KiwiSaver funds, any return that is reported shows you what has happened in the past. The past is no guarantee of future returns. It is not like a bank term deposit which tells you the percentage return you will earn over the future duration of the investment.
You also need to be careful when comparing funds because all funds are not the same.
A growth fund has far more exposure to the share market than a conservative fund. The conservative funds will have more of their money invested in fixed-interest investments. The fixed-interest investments are generally considered lower risk than sharemarket investments, but are also likely to provide lower returns over the longer term.