If you're among the 381,000 KiwiSaver members who joined KiwiSaver upon starting work and have done nothing else, from December 1, the company in charge of investing your money could change.
A Government announcement made on Friday confirmed the nine default KiwiSaver providers will reduce to six when current arrangements end on November 30.
The six new default KiwiSaver fund providers will be Bank of New Zealand, Booster, BT Funds Management (Westpac), Kiwi Wealth, Simplicity and Smartshares (NZX).
The current nine default providers are AMP, ANZ, ASB, Bank of New Zealand, BT Funds (Westpac), Fisher Funds, Booster, Kiwi Wealth (Kiwibank) and Mercer.
From December 1, existing KiwiSaver members considered to be 'default investors' who are enrolled with an exiting default provider (AMP, ANZ, ASB, Fisher Funds or Mercer) and haven't made an active choice to stay there will be transferred to one of the new default providers.
Those enrolled with a returning KiwiSaver default provider (Bank of New Zealand, Booster, BT Funds or KiwiWealth) who haven't made an active choice will stay with their provider. But in both cases, not making an active choice means savings will be moved from a 'conservative' fund to a 'balanced' fund.
As the new default providers were selected by an independent panel as offering the best value for money, why should members already invested with them make an active choice?
According to Mint Asset Management head of sales David Boyle, an active decision allows people to take ownership of their money, making them more engaged in seeing it grow.
"Making an active choice creates ownership, connecting people to their money, their retirement, their future financial wellbeing," Boyle said.
For existing KiwiSaver members who want to choose who controls their money and where it's invested, experts suggest taking the following four steps.
1. Check who your KiwiSaver provider is
The first step is to check your KiwiSaver statement or KiwiSaver provider portal and find out who your KiwiSaver provider is. If you have a financial adviser, you could also check with them.
David Boyle suggests contacting the provider to check they have up-to-date contact details. It's also a good idea to check the Prescribed Investor Rate (PIR), which determines the amount of tax paid on investment earnings, is correct.
2. Check the type of fund you're in
The next step is to check the type of fund you're in (e.g. conservative, balanced, growth or aggressive).
This can be found on KiwiSaver correspondence or by checking with your current provider.
KiwiSaver members can change their fund at any time. Among the things to consider when choosing a fund are age, attitude to risk, if and when KiwiSaver funds will be used towards a first home and number of years to retirement.
From December 1, the default fund will change from a cash-based 'conservative' fund to a 'balanced' fund. This means even if your default provider is reappointed, if you don't make an active choice, the type of fund your money is invested in will change.
Balanced funds have more growth assets such as shares and property. There's potential for higher gains over the long-term, but taking on more risk can cause the account balance to fluctuate.
An FMA spokesperson said as people have different goals, members are encouraged to do their own research to find a fund that suits their needs.
Clive Fernandes, managing director of KiwiSaver advice provider National Capital said being in the right type of fund and contributing the right amount for your personal circumstances can "make a much larger difference in your ultimate financial outcomes than anything else".
3. Do some research
Once you know who is investing your money and how it's invested, it's easier to compare fees and past performance across providers.
The MorningStar KiwiSaver Survey is also useful. It provides a summary of past returns and fees according to provider and fund type.
Sorted confirms the current average fee for balanced funds is 1.26 percent (based on a $10,000 account balance over 12 months). Combined fees for default provider 'balanced' funds from December 1, 2021 are as follows (actual fees charged depend on account balance).
Default provider fees for balanced funds (% of account balance):
- BNZ: 0.35 percent.
- Booster: 0.35 percent.
- Kiwi Wealth: 0.37 percent.
- Simplicity: 0.30 percent.
- Smartshares: 0.20 percent.
- Westpac: 0.40 percent.
Source: Commission for Financial Capability.
Clive Fernandes suggests weighing up fees charged against the level of service provided. Examples of good service are access to personal advice, an experienced investment team and regular communication.
4. Make an active choice
The final step is to contact your chosen provider to make an active choice. To avoid being switched to a different default KiwiSaver provider, a decision needs to be made by November 30.
If you're in a default fund and want to stay with your existing provider, you can contact them to confirm. If you want to switch providers, you can contact the new provider who will handle the switch.
The FMA confirms members enrolled with the six new default KiwiSaver providers can expect proactive communication and advice given at key milestones, including upon joining. Planned campaigns and activities such as an annual member statement and during periods of high financial uncertainty will help KiwiSaver members make wise investment decisions.