KiwiSaver: Why we need to treat it as an investment fund rather than a savings account

KiwiSaver – over 2.6 million of us have joined, and it's easy to assume we're on track to a comfortable retirement simply because we're signed up. We're putting away our hard-earned money and trusting someone to invest it wisely on our behalf so it's important we treat it as an investment fund rather than just a savings account.

There are a few simple ways to ensure your KiwiSaver investment is getting the best returns, and ultimately earning more dollars for your future self.

Choose the right fund for you

There are 5 types of funds KiwiSaver schemes may invest in: Defensive, Conservative, Balanced, Growth and Aggressive funds. Factors to consider when choosing your fund include number of years until retirement, amount of risk you're willing (and able) to take, fees and previous fund returns.

KiwiSaver members who were enrolled automatically who didn't choose a fund are likely to be invested in a "conservative" fund, designed to reduce risk, which might not necessarily be best for you. Many of us choose providers based on the simple reason we will be able to see all our balances in the same place – which is certainly convenient, but not always the most important criteria in choosing the right provider.

Example showing the difference between funds - Source: www.generatekiwisaver.co.nz
Example showing the difference between funds

Source: www.generatekiwisaver.co.nz

Expect ups and downs (especially if you are in a higher risk fund)

It's possible you'll check your balance one day to see a loss, even after consistent growth. These are the typical ups and downs you experience with investment funds. If you've got plenty of years until retirement, it's likely you can afford to ride out the lows to earn more in the long-term. If you panic and change to a conservative fund, you essentially cement in your losses and make it difficult for your fund to recover.

Consider contribution levels

We can choose to contribute 3%, 4% or 8% of our pay. If you can afford a higher contribution, the difference over a number of years could add hundreds of thousands to your KiwiSaver savings.

Maximise the benefits

KiwiSaver offers a number of benefits, including Member Tax Credits. The Government will contribute up to $521 each year, provided you contribute a minimum of $1042.86 before June 30 each year. If you haven't contributed enough, you can make a voluntary contribution to ensure you receive the full member tax credit.

Consider what to do with your KiwiSaver savings after 65

You are eligible to gain access to your savings when you turn 65 (if you have been contributing for a minimum of 5 years). But there are different options around leaving all or some in the account and withdrawing later, continuing to earn investment returns and accessing the money any other time.

Get expert advice

Our best advice is to get advice. A KiwiSaver expert can assess your situation and guide you through a plan or small changes to ensure you'll be getting the most out of your KiwiSaver investment. Get in touch to book an appointment to discuss your KiwiSaver options.


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