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In 2007, KiwiSaver was introduced to help New Zealanders save for their retirement, but many people make the mistake of either choosing the wrong fund, staying with the wrong provider, or opting out of it altogether.
Johan Brujin, a personal insurance and KiwiSaver advisor with The Wealth Supply Co, said people underestimate the power of KiwiSaver and the importance of being in the right fund.
“You’ve got conservative funds, which are lower risk, and obviously, you get lower returns because of where the assets are based. In the middle, you’ve got your balanced funds, which are a bit of risk but not too much, and then you’ve got your growth funds, which are typically 10 plus years until you need the money.
“Not every fund is the same, and just a few per cent makes a huge difference if you’ve got time.
“For people that have 20 or 30 years left, going between a balanced and a growth fund can make a huge difference in the long run, and I’m talking about tens or even hundreds of thousands of dollars’ difference.”
What makes KiwiSaver attractive to so many people is that an employer matches employees’ contributions. The government contributes 25 cents for every dollar the employee contributes annually.
Brujin said that even if people decided to opt into KiwiSaver later in life, it was still worth it because even if someone was only in it for 10 years, it was still extra money.
“You essentially give yourself a pay rise when you opt into KiwiSaver because then you’re getting extra contributions from the employer.”
A major problem is people staying with the same provider without checking whether there is a better one that is right for them.
“At the end of the day, every provider charges a fee to look after your money and invest it for you. That’s the whole purpose of a fund manager.
“In that sense, you’re getting charged for a service; you may as well make sure you’re getting the most bang for your buck, and not every provider is performing equally.
“Performance after fees is the key,” said Brujin.
