Get savvy about switchingPosted to Financial Capability on 26-08-2015
An increasing number of KiwiSaver members are changing providers – nearly 160,000 contributors switched schemes in the past financial year, the latest figures from Inland Revenue show.
With dozens of KiwiSaver providers offering close to 200 KiwiSaver funds, the choices can be overwhelming. If you don’t select a KiwiSaver provider yourself, you’ll be funnelled into a conservative investment option with one of the nine government-appointed default providers. More than half a million KiwiSavers are currently invested in default funds.
According to SavvyKiwi, an independent KiwiSaver guidance and fund comparison app, this could mean significant opportunity costs for some of these people. Founder Binu Paul says default KiwiSaver funds have been seeing significantly low returns relative to others - returns on KiwiSaver funds over the past five years have ranged anywhere from 3% to 20% per annum.
For those thinking about changing KiwiSaver providers or funds, here are some factors to consider:
- When evaluating the performance of a KiwiSaver fund, focus on after-fees returns. Over the years, fees have a big effect on how fast your savings grow.
- Rather than look for the ‘cheapest’ fund, focus on value for money. Our Sorted FundFinder allows you to compare KiwiSaver funds by fees, services and returns.
- When comparing multiple KiwiSaver funds, ensure you’re comparing apples to apples. A defensive fund will be invested in very different assets than a growth fund.
Next: The juggling’s over