As part of KiwiSaver’s septennial review, the New Zealand Government has recently announced some major changes to the scheme for ‘default providers’, coming into effect on 1 December 2021.
Are you invested in a default scheme? Not sure if you are, or which is your provider? Here are some key things to know about the upcoming changes, and why it may be an opportunity for you to make the most of your KiwiSaver.
Targeted to KiwiSaver default members – those who have never selected a provider or a fund upon being enrolled by their employer – the changes highlight the importance of actively engaging with your KiwiSaver.
Here are the main changes:
– Five current default providers (AMP, ANZ, ASB, Fisher Funds, and Mercer) will lose their ‘default status’ on 1 December 2021, and a new set of providers of KiwiSaver default funds will be in action from that date. For the next seven years (2021-2028), the KiwiSaver default providers will be Bank of New Zealand, Booster, BT Funds Management (Westpac), Kiwi Wealth, Simplicity, and Smartshares.
– Importantly, from 1 December, default providers will have to invest in balanced funds rather than conservative (low risk). This is good news for many default members. Default funds have traditionally been ‘conservative’ so far, which means that default members who have never selected a fund may have unwittingly missed out on higher returns. Although slightly higher-risk, balanced funds are likely to yield higher returns in the long run for members.
– Lastly, default providers will also not invest in fossil fuel production, or illegal weapons, and will charge lower fees.
Default funds have been designed to be a kind of ‘parking space’ for KiwiSaver members until they actively choose their fund, based on their risk profile and investment horizon. But the reality is, there are still many people who are invested in default funds – potentially missing out on higher returns over time.
If you’ve never chosen a provider or fund upon being enrolled to KiwiSaver by your employer, you’re likely invested in a default fund. Not sure? Get in touch: we can help you find out who your KiwiSaver provider is. Otherwise, you can call 0800 KIWISAVER or log in to MyKiwiSaver to learn more.
– If you are a default member, your KiwiSaver savings will be automatically moved to a balanced fund (from conservative) after 1 December. You don’t need to do anything, unless you want to stay in a conservative fund – in which case you’ll need to contact your provider.
– If you’re currently in a default fund with one of the exiting providers, unless you make an active choice before 30 November 2021, you will automatically be switched to the default balanced fund with one of the incoming If you’d like to stay with your current provider, you will need to get in touch with them.
Is the fund you’re in appropriate for your investment goals and needs? This latest Government review, and the changes coming up in December, can be an opportunity to choose a fund that’s better suited to your unique circumstances.
When it comes to investing, one size doesn’t fit all – and a balanced fund may not be what you need. For example, if retirement is far in the future and you’re not planning to use KiwiSaver for your first home, a higher-risk fund may be an option for you. The nearer you are to withdrawing your funds – for retirement or a home – the lower risk you may be able to take on.
Once you know where your KiwiSaver money is invested, you can determine if the fund is the right fit for you, or select a different fund type and/or provider. Of course, you can change your fund at any time – is now a good time to think about it?
As financial advisers, we’re here to help you identify your risk profile, understand your next steps forward, and compare providers and fund types.
If you have any questions, please don’t hesitate to contact us.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.