How do you choose your KiwiSaver provider?
1. You didn’t: you were allocated a default provider by the IRD
If you do not choose your own provider, the IRD randomly allocates you to a default provider and they will automatically invest your money into a low performing default fund. They will also put you on the highest tax rate and simply wait for you to make a choice as to what you want to do.
2a. You did: the bank teller signed you up
The bank staff can only provide advice on the funds their bank manages and a lot of the time they don’t provide any advice. They also probably told you that you could see your balance every time you log in to their app. Are these good reasons for choosing a provider?
2b. You did: when you first joined KiwiSaver years ago
You can’t remember why or how you chose it. Maybe you chose a provider that is no longer around or has been sold to someone else e.g. Gareth Morgan KiwiSaver, TOWER KiwiSaver. Some things to consider; is there a better scheme for you that has since started? Have there been changes with existing schemes that make them more/less appropriate for you? Is the performance of your KiwiSaver fund better/worse than the average?
Make sure you choose your provider based on what you want to achieve and your current goals.
How do you choose your KiwiSaver fund?
1. You didn’t: you were allocated into a default fund (see above)
Most providers have a low, medium and high-risk fund. The lower the risk, the lower the potential return – they put more money into cash and fixed interest (term deposits) and less money into shares and property. The more money in shares and property the higher the potential return and more ups and downs.
2a. You did: but is it the right choice now?
Your circumstances may have changed – perhaps you have purchased your first home or you would like to purchase your first home shortly. It is expected that your risk tolerance and fund choice will change over time as your situation changes. Have you reviewed this choice recently?
2b. You did: or you thought you did
There was a list of funds and you picked the one that “seemed” right. You really did not understand what you were doing but there was no one to ask. Anyone that you did ask gave very confusing answers. You would love someone to make things simple – surely it isn’t that hard to make an informed choice. We agree, that's why we have a resident KiwiSaver Specialist to answer any questions you may have.
Your KiwiSaver, if managed correctly, could help you buy a new home or pay for your retirement. Get the most out of it - I'm here to help.
By Stephen France - KiwiSaver Specialist