
‘Dramatic Shift' That Could Leave KiwiSaver Members Better Off
A 'dramatic' shift of KiwiSaver investments into riskier funds should make New Zealanders better off in the long run, if past trends hold true.
The Financial Markets Authority (FMA) released research this week noting the significant shift in risk of KiwiSaver investments.
The proportion of KiwiSaver in funds that are risk category five, with high volatility, has quadrupled from 10 percent in 2021 to more than 40 percent in 2024.
Riskier funds can be expected to be more volatile but over the long term should produce better results. They are generally recommended for investors who still have a significant period of time until they need to access their investments.
Morningstar data shows that aggressive funds have returned 10.89 percent a year over five years, and 9.34 percent over 10 years.
That is compared to 3.07 percent a year over 10 years for conservative funds, 4.47 percent for moderate funds, 6.18 percent for balanced and 7.68 percent for growth.
Data director Greg Bunkall said cash investments' returns had lagged the rate of inflation over that time.
The FMA said the proportion of KiwiSaver investments in lower risk funds dropped from 30 percent to 10 percent over the same 2021-to-2025 period.
Part of this was due to the change to default funds, which now require them to be balanced. But it said there were other factors at play, too.
'In the period prior to the Covid-19 global pandemic, interest rates were historically low, and inflation was low and stable. As a result, many fixed-income assets provided low returns. On the other hand, stock markets have performed very well in most years since 2017, and the few periods of weakness quickly reversed.
'The strong performance and relative stability of stock markets may have therefore made higher-risk investments more attractive to investors. The persistence of this situation over several years may have contributed to the observed shift in preference for higher-risk investments, illustrating adaptive expectations among investors.'
It said market performance could also have affected the risk rating of funds. Spikes of volatility in 2020 and earlier this year affect funds' performance history.
A number of providers have recently launched 'high growth' funds that invest almost solely in equities.
FMA director of markets, investors and reporting John Horner said the FMA was not necessarily implying that people were in the wrong fund or that providers were advising members towards higher-risk funds.
'The observed increase in the risk categorisation of KiwiSaver funds appears to reflect a combination of factors including policy settings, investor behaviour, and market volatility.
'KiwiSaver is a long-term savings regime for retirement, and for most long term investments a higher risk strategy will be appropriate.
'We note that as KiwiSaver has been in existence for a while and become more mature there are more options available, including higher risk options, and there is also more material available to allow investors to educate or inform themselves about risk vs reward.'
Fisher Funds general manager of KiwiSaver David Boyle said the increase in investments in riskier funds was a good thing for investors wanting to grow retirement savings over the long term.
He said consumers knew more about the role of growth assets in a long-term savings scheme like KiwiSaver. Fund mangers were responding to consumer interest and providing education on the risks and benefits of different fund types.
Investors had experienced the Covid downturn and seen the recovery.
'The advent of platforms that allow investors to build their own portfolios allows providers to launch single sector specialist offerings that are often at the riskier end of the spectrum.'
He said members still had choice and there were many lower-risk and savings options available.
Booster chief executive Di Papadopoulos agreed New Zealanders were becoming more sophisticated in assessing their time horizons and figuring out if they could handle more risk to target higher returns.
'It appears people are moving to higher risk funds that align with them not needing their KiwiSaver money for retirement anytime soon,' she said.
'At Booster, we have seen the benefit of these decisions. Moving from a balanced fund to a growth fund increases projected balances at retirement significantly.
'A key factor is how soon or long in the future your might need to access your KiwiSaver, such as if you want to use it to buy your first home, or for your retirement.
'If you're unsure about whether you are in the right fund it's a good idea to check in with a financial adviser.'
How much difference might your outlook be?
Based on Sorted's retirement calculator…
A 20-year-old joining KiwiSaver now with no investment, earning $60,000 and contributing 4 percent of their salary plus an employer's contribution of 4 percent could expect to have at 65:
$381,354 in a balanced fund
$477,814 in a growth fund
$606,456 in an aggressive fund
This accounts for inflation.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Scoop
an hour ago
- Scoop
Consumer NZ Is Stoked To Learn Surcharges Will Be Banned
From May 2026, New Zealanders will be able to tap their card or phone without being charged those pesky, excessive and sometimes hidden surcharges. An amendment to the Retail Payment System Act will put an end to excessive, hidden and unavoidable surcharges, which cost New Zealanders an estimated $65 million a year. Jessica Walker, acting head of research and advocacy at Consumer NZ, is thrilled to see surcharges scrapped because it will put millions back into the pockets of New Zealanders, and make accepting payments much simpler for merchants, too. 'We've received close to 300 complaints about excessive surcharges (over 2%) in the last few years. In some cases, card payment surcharges were as high as 25%. We've even had complaints about surcharges being applied to EFTPOS transactions. 'We've been calling for surcharge regulation since 2017 and, recently, urged the Commerce Commission to consider an outright ban. Although surcharge guidelines were in place, they clearly weren't working. "The whole surcharge situation here in New Zealand is currently a mess. Surcharges for debit and credit cards are banned in the United Kingdom and European Union, and the Reserve Bank of Australia recently proposed a surcharge ban – so this brings us nicely in line with other countries," says Walker. 'The ban is a no-brainer. These new rules will bring an end to a very messy situation!' What consumers need to know The ban will only apply to debit, EFTPOS, Visa and Mastercard payments, so if you're paying with another card, such as an AMEX or foreign-issued card, you may still have to pay a surcharge. The ban also won't apply to prepaid gift cards. Online payments are excluded. This is disappointing because your flight or accommodation booking or any other online purchases could still attract a surcharge. Australia is considering making online payments part of its surcharge ban. We'll be calling for similar rules here. The cost of your coffee shouldn't increase by that much, if at all. If merchants choose to increase their prices to cover their payment costs, any increase should be very minimal because interchange is being lowered which will reduce the cost to businesses of accepting payments.


Otago Daily Times
2 hours ago
- Otago Daily Times
Plan to ban credit card and PayWave surcharges
The government plans to ban surcharges on card payments in-store, saving shoppers from being stung with surprise fees when paying with contactless technology. Commerce and Consumer Affairs Minister Scott Simpson announced the change on Monday afternoon, declaring: "That pesky note or sticker on the payment machine will become a thing of the past." "Shoppers will no longer be penalised for their choice of payment method, whether that's tapping, swiping or using their phone's digital wallet." Legislation is expected to be introduced to Parliament by the end of the year, with the ban to kick into effect no later than May 2026. The proposed law would cover most in-store payments made using Visa and Mastercard debit and credit cards, as well as EFTPOS, but not online purchases or other international card schemes. The move follows growing public frustration at the cost and transparency of such surcharges. Retailers are increasingly using them to recover merchant service fees charged by banks and payment providers, but the fees are often added without clear explanation. The Commerce Commission estimates New Zealanders are paying up to $150 million in surcharges each year - including $45 to $65 million in what it considers excessive charges. In March, Consumer NZ called for an outright ban, citing hundreds of complaints about fees being too high, confusing or oblique. Both Mastercard and Visa have also supported proposals for a ban. Retail NZ has previously argued businesses did not like charging extra but should have the right to recover payment costs. It called for more clarity from banks about the fees charged for different services. The ban builds on the Commerce Commission's recent decision to reduce the interchange fees imposed on businesses for accepting Visa and Mastercard payments. Interchange fees make up approximately 60% of merchant service fees. "A ban on surcharges means no more surprises for people who currently feel like they're being charged to use their own hard-earned money," Simpson said. "It means they can make a purchase knowing exactly what they'll pay, and how they'll pay it." The changes would bring New Zealand into line with the United Kingdom and the European Union, where such surcharges are already prohibited. Australia still allows surcharges but requires them to reflect the actual cost to retailers. The Reserve Bank of Australia has also recently proposed an outright ban on surcharges for EFTPOS and debit and credit card payments.


Otago Daily Times
2 hours ago
- Otago Daily Times
Govt to ban surcharges on in-store payments
The government plans to ban surcharges on card payments in-store, saving shoppers from being stung with surprise fees when paying with contactless technology. Commerce and Consumer Affairs Minister Scott Simpson announced the change on Monday afternoon, declaring: "That pesky note or sticker on the payment machine will become a thing of the past." "Shoppers will no longer be penalised for their choice of payment method, whether that's tapping, swiping or using their phone's digital wallet." Legislation is expected to be introduced to Parliament by the end of the year, with the ban to kick into effect no later than May 2026. The proposed law would cover most in-store payments made using Visa and Mastercard debit and credit cards, as well as EFTPOS, but not online purchases or other international card schemes. The move follows growing public frustration at the cost and transparency of such surcharges. Retailers are increasingly using them to recover merchant service fees charged by banks and payment providers, but the fees are often added without clear explanation. The Commerce Commission estimates New Zealanders are paying up to $150 million in surcharges each year - including $45 to $65 million in what it considers excessive charges. In March, Consumer NZ called for an outright ban, citing hundreds of complaints about fees being too high, confusing or oblique. Both Mastercard and Visa have also supported proposals for a ban. Retail NZ has previously argued businesses did not like charging extra but should have the right to recover payment costs. It called for more clarity from banks about the fees charged for different services. The ban builds on the Commerce Commission's recent decision to reduce the interchange fees imposed on businesses for accepting Visa and Mastercard payments. Interchange fees make up approximately 60% of merchant service fees. "A ban on surcharges means no more surprises for people who currently feel like they're being charged to use their own hard-earned money," Simpson said. "It means they can make a purchase knowing exactly what they'll pay, and how they'll pay it." The changes would bring New Zealand into line with the United Kingdom and the European Union, where such surcharges are already prohibited. Australia still allows surcharges but requires them to reflect the actual cost to retailers. The Reserve Bank of Australia has also recently proposed an outright ban on surcharges for EFTPOS and debit and credit card payments.