Don't agonise over which KiwiSaver provider to choose - just jump in and join. After you're signed up there will be plenty of time to ponder and get informed, and it should be easy to make any changes, writes Laurel Stowell
From the point of view of the individual, it's a pity not to get your fair share.Mary Holm, financial columnistEVEN the least financially savvy person who joins KiwiSaver will get about 80 per cent of the benefit, says financial columnist and KiwiSaver author Mary Holm.
That could be a person who is automatically enrolled in KiwiSaver after starting a new job and who simply sticks with a default fund.
"They will still end up with a lot more than they would have if they had saved elsewhere, or not saved at all."
And KiwiSaver is especially beneficial for people who have never owned a home. They can remove their contributions, employer contributions and returns on their savings after three years and - if they qualify - get a deposit subsidy on their first home.
KiwiSaver has been taken up by a wide cross section of New Zealanders, including a surprising number of people on low incomes.
That could be partly because workers are automatically enrolled when they start a new job, Holm says.
"For employees, it just all happens."
Although new employees can opt out after a few weeks, many don't.
Each saver gets a government contribution of $1000 to kickstart their savings, then workers contribute two to eight per cent of their pay and employers top it up. There is a lot for individuals to gain from the scheme, especially since they can take a contributions holiday whenever they want.
There are very few who can't afford to join the initiative, but one group could be people on very low incomes, especially if they have dependents. "There's an argument to say if you are on a really low income and likely to remain so all your life you don't really need to save for retirement, because New Zealand super will give you as much as you're used to earning," Holm says.
Even beneficiaries would be wise to join though, and many could afford the $10 a week needed to get first-home help. Otherwise they don't have to put in anything.
When KiwiSaver first came on the scene Holm thought it would need some explaining and she wrote books about it - but she says the basics are fairly simple.
People starting new jobs are automatically enrolled with one of the default funds, which are fairly low-risk and conservative.
If they stayed with those funds they would get maybe around 80 per cent of possible benefits.
Conservative funds investing mainly in bonds and cash are lower risk. They are ideal for people wanting their money out within the next few years - for example, people soon retiring or buying their first home.
But as home ownership becomes secure, the KiwiSaver balance grows and with retirement still years away, savers may start looking at higher risk and more lucrative funds.
There are about 30 providers of KiwiSaver funds. Most of them are banks and insurance and investment companies. Most offer several funds.
Higher risk funds invest in higher percentages of shares and often property.
The value of shares can fluctuate wildly but they tend to perform better than cash or bonds in the long term.
A lot of people find that volatility difficult to cope with, Holm says especially with share prices plunging in the last few years.
Financial education could help savers ride out the highs and lows without anxiety.
Changing KiwiSaver funds should be easy. The saver only has to contact the new provider they have chosen and there should not be any fees.
"They arrange for the money to be moved and tell IRD," Holm says.
Changing funds within the same provider should be even easier. The Government wanted to make sure it was easy to change because it wanted competition in the market.
Deciding which fund to change to is another matter.
Savers can hire an authorised financial adviser (AFA), or read financial columns and books for advice.
There are also excellent independent websites to consult, especially sorted.org.nz and kiwisaver.govt.nz. The Sorted website has a free booklet that is available to download or post out.
When choosing a scheme, pay attention to how much the fund charges in fees and how well it communicates, Holm suggests. There will be a KiwiSaver fee calculator at Sorted from the middle of this month.
While virtually any adult can benefit from joining KiwiSaver, Holm is not so sure it's good for New Zealand as a whole.
"The country is short of money and it costs a lot. It's not necessarily good government policy but from the point of view of the individual it's a pity not to get your fair share."
The Government has already made changes to KiwiSaver, and there could be more. She wonders how long the $1000 kick start will last, for example, and whether contributing might become compulsory.
But even if there are changes you don't like in the future, it's still worth joining now, she said. And with two million people enrolled before the end of this year, no government will risk deeply unpopular changes.