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Default KiwiSaver providers, explained

June 16, 2021

You may have heard the term “default provider” being thrown around, especially in the media lately. We’ll explain what a default KiwiSaver provider is and what it means for you – especially if you’re not sure about your current KiwiSaver setup.

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What is a KiwiSaver default provider?

When you first get a job and start getting a regular income, preparing for your retirement probably isn’t at the top of your mind. However, making sure you have enough to live comfortably in your later years takes time, which is where KiwiSaver comes in. If you don’t already have a KiwiSaver account, you’re over 18 and you start a new job, you’ll normally get signed up to KiwiSaver automatically. That way, you, your employer, and the government can start making contributions towards your future.

There are a lot of different KiwiSaver providers, each with their own fund types, fees and returns. If you’re just getting started with KiwiSaver, having to research fund providers and types can be a little overwhelming. To make sure as many people get started with KiwiSaver as early as they can, the NZ Government undergoes an application and review process every seven years to choose default providers. If you don’t pick a provider, your KiwiSaver account will be started with one of the default providers.

Who are the current providers with default status?

On 14 May 2021, the Government completed their second seven-yearly review of default KiwiSaver providers since KiwiSaver started in 2007, taking into consideration:

  • their experience with investing
  • their fees
  • member communication and education.

After this review, two new providers were given default status and five others were removed from the group (AMP, ANZ, ASB, Fisher Funds, and Mercer). From 1 December 2021, the six default KiwiSaver providers will be:

  • Kiwi Wealth
  • BNZ
  • Booster
  • BT Funds (Westpac)
  • Simplicity
  • Smartshares (NZX)

We’re absolutely thrilled to be selected once again as a default KiwiSaver provider and we can’t wait to help a whole new bunch of Kiwi start saving and investing for their future.

Should I stay or should I go now?

If your KiwiSaver account is currently in a default fund managed by a provider losing their default status in December, and you haven’t made an active decision to remain in that default fund, your investment will be reallocated to a new default provider. But if things are changing anyway, now might be the best time to do a little bit of research and make sure you’re with the best KiwiSaver provider and fund for your goals.

For a lot of people, KiwiSaver is a “set and forget” kind of thing. Is it going to be enough for you to buy your first home or retire when you’re ready? A change to your fund or provider now could mean more money for your future. Here are a few things to consider:

Does my current KiwiSaver provider take risks I’m comfortable with?

When you invest money into your KiwiSaver account, depending on what fund you are in, you’re investing it in a combination of low-risk income assets (such as cash and bonds) and higher risk growth assets like shares and property. The higher the percentage of your KiwiSaver account that’s invested in growth assets, the more risk you’re taking and the more likely you are to see bigger returns in the long-term.

Here are five different fund types you could be in:

  • Cash funds are lower risk, investing only in cash assets. These funds generally have lower returns over the longer term.
  • Conservative funds normally have the lowest risk when compared to other funds (apart from cash funds), investing mostly in cash assets. If you’re in a default fund currently, it’s probably a conservative fund.
  • Balanced funds are the middle of the road in terms of risk, investing between 35% and 62.9% in growth assets. From 1 December 2021, default funds will be invested in a balanced fund.
  • Growth funds are for those a bit more comfortable with taking risk, investing between 63% and 89.9% in growth assets.
  • Aggressive funds have the highest risk as well as the highest possibility of big returns, investing between 90% and 100% in growth assets.

If you’ve been default allocated into a default fund by Inland Revenue, you’ll currently be invested in a default fund. At the beginning of December, you’ll automatically be moved into a Balanced fund. This is a great medium risk, medium reward fund, but it might not be the right one for you. If you need help choosing a fund, our friendly customer services team are available Monday to Friday, 9 till 5. If you’re already a customer with us, you can use the Fund Finder tool in myKiwiWealth to get a personalised recommendation of the best fund for you.

Is my KiwiSaver account being invested ethically and locally?

It’s easy to forget that the money you see in your KiwiSaver account isn’t just sitting there – it’s being invested in different companies, assets and ventures in New Zealand and overseas. While all the default funds from 1 December 2021 are required to not invest in fossil fuel production or illegal weapons, that doesn’t mean your money is being invested where and how you want it to be. We have some investments in local tech start-ups and small Kiwi businesses looking to expand, all while following our strict Responsible Investment Policy to try and make sure we’re not investing your money in anything you don’t want it to be.

Getting involved

If you’re in a default fund with a default provider, chances are your KiwiSaver account will be changing for the better come December. Now’s the time to do the research and make sure it’s changing for the best.

Tags: KiwiSaver

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