KiwiSaver: Young Kiwis in the wrong fund

The regulator has shared data indicating over 12,000 KiwiSaver members aged 26-35 years old are sitting in lower risk or conservative funds after switching from higher-risk growth funds during Covid-19 market volatility.

Data supplied to the FMA by 11 KiwiSaver providers shows around 12,700 younger KiwiSaver members switched from growth to conservative funds between February and April last year.

Most of them are still sitting in conservative funds, which may not be aligned with their long-term savings goals.

FMA manager of investor capability Gillian Boyes says, is calling for young New Zealanders to check if they’re in the fund that suits their needs.

“Generally speaking, you should be in a high growth fund the younger you are and the further you are from retirement.

“Growth funds provide the greatest opportunity to maximise returns and although the balance might jump around, young people have plenty of time until retirement age to recover any losses.

“The exception is if you are planning to make a first-home withdrawal within the next one to three years and may want to choose a conservative fund so you have more certainty around your balance.”

Boyes said the number of young people who are in a fund that does not match their needs is likely larger than the data suggests, as FMA data represents around three-quarters of the KiwiSaver market.