KiwiSaver: Are you missing out on money?

Wednesday, 17 April 2019

Choosing the wrong KiwiSaver fund could cost you thousands of dollars in retirement – but many New Zealanders say their providers aren't doing enough to inform them about their investments.

A new survey of more than 2000 people by Consumer NZ found the satisfaction ratings fell for almost all the 13 providers covered by the research.

Just 45 per cent of KiwiSaver members thought their providers did a good job in keeping them up-to-date with what was happening with their investments.

Three-quarters did not know what they paid in fees every year and two-thirds were unsure how their fund was doing compared to the rest of the market.

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A quarter did not know what type of fund their money was in.

That's a problem because it makes a big difference over your investing lifetime.

If you have many years until you need to access your money, you should generally invest in more growth assets.

They are more volatile but, with a longer investment timeline, you have more time to ride out any slumps in value. The long-term return is usually better.

AMP's online calculator estimated that a 25-year-old woman earning $60,000 who had $10,000 in her account already and contributed 3 per cent of her pay plus 3 per cent from an employer would end up with $206,939 at retirement in a balanced fund, $271,185 if she was in an aggressive fund but only $156,087 in a conservative fund.

Other estimates have put the difference between the most conservative fund and the most aggressive fund at hundreds of thousands of dollars.

Providers of default KiwiSaver schemes are required to report to the Financial Markets Authority on how they encourage members to make an active choice about their money. The regulator has expressed frustration at a lack of action from some.

Default funds are invested conservatively.

Consumer NZ chief executive Sue Chetwin said only 48 per cent of KiwiSaver members were happy with the service they got overall, down from 52 per cent last year.

Satisfaction scores for three of the biggest providers – AMP, ANZ and ASB – were significantly below the industry average. 

Only 36 per cent of ASB customers were very satisfied, 37 per cent of those with AMP and 41 per cent of ANZ's members.

Chetwin said the fall in ratings was likely influenced by sharemarket volatility, which had led to a bumpy 12 months for some funds. 

But the quality of information consumers got about their funds also affected satisfaction, she said. 

​Chetwin said consumers also lacked information about whether their funds were being ethically invested. 

'For many, returns are just as important as knowing their money is invested responsibly. The majority said they'd be concerned if their cash was being invested in stocks such as gambling, pornography and weapons, but didn't know whether their fund manager excluded investment in these areas.' 

But David Boyle, previously head of investor education at the Commission for Financial Capability, said much of the information was being provided.

Providers now must explain to all members what fees they are paying, in dollar terms.

He said in some cases it might be that the information needed to be presented in a way that was easier for people to understand.

He said it was disappointing that satisfaction had dropped and that, almost 12 years after the scheme began, some people still did not know what type of fund they were in.