It's been five years now since fund managers first got their hands on your KiwiSaver dollars. While the savings scheme launched on July 1, 2007, it wasn't until September that the money was shifted from Inland Revenue to investment managers.
Yesterday research firm Morningstar released the performance figures for that first five years of investing, revealing a wide range in the competing funds' performance, and allowing savers to compare their fund with others.
John Body, head of ANZ Wealth - the country's largest KiwiSaver provider through its subsidiary OnePath - says five years is a timely period for savers to consider the performance of their KiwiSaver fund. "Five years is a relevant benchmark because it typically allows for a whole business and investment cycle," he says.
The fact that this particular five years has been dominated by the global financial crisis should make no difference, he argues.
"If you think about the last 40 years we've probably had three to four events."
All managers, says Body, have had to cope with the same market conditions.
So what if your fund's performance is below the average in its category for the past five years?
Claire Matthews, a senior lecturer at Massey University, says it's important to first make sure you're comparing the same type of fund.
"People need to look at the risk of the fund - I wouldn't want people to compare a conservative fund with a growth fund," she says.
If a fund is consistently performing poorly, compared with others in the same category, Matthews suggests investors should be asking why: "is it management, is it strategy?"
Michael Littlewood, co-director at Auckland University's Retirement Policy and Research Centre, suggests putting the questions in writing. "You're unlikely to get a very satisfactory answer over the phone. You have to write to them and if you can't understand the answer then you need to ask someone for help." That could mean paying someone to explain it to you and advise on the next step, he says.
The alternative is to consider switching.
Morningstar co-head Chris Douglas is cautious about making a decision to switch based purely on the return figures.
"We don't advocate people switch based on performance alone," he says.
Douglas says savers also need to consider things such as disclosure, transparency, cost and quality of information. And if savers want to change scheme they should undertake a financial health check first, Douglas suggests.
"Many providers have questionnaires on their websites where people can find out their risk profile and make sure you are in the appropriate option."
Peter Neilson, chief executive of industry body the Financial Services Council, says savers should be looking at the performance of their scheme every two to three years and making sure it still matches their risk profile.
"Straight after the global financial crisis many people were very conservative and that has served them well over the last five years but in the longer term that's not going to give the best performance," he says.
Growth funds, which have higher levels of investment in shares and property, are typically expected to perform better over the longer term.
Neilson says people need to remember that KiwiSaver is a long-term investment, not one forr the short term. "Research tends to show people over-respond to short term performance and under-react to long term trends."
At the other end of the scale, commentators say chasing last year's top performer can be disastrous.
Morningstar's Douglas says there is a natural tendency for investors to chase performance.
"It is very difficult - it is a behavioural bias that many investors have."
But Douglas says the top performers in one year could be at the bottom the next year.
"If you are just trying to pick last year's best performers you are invariably going to come up short."
Neilson says the best performing funds typically did well over a few years but as they grew in size it became harder and harder to beat the market.
"It's harder to outperform the market if they get bigger because they eventually become the market."
Littlewood says there is US research which shows that out of 300 funds, over several decades only three could consistently beat the average.
However he says the New Zealand sharemarket is different, as some managers are able to out-perform. "It is possible for some managers to do well."
But Littlewood says most KiwiSaver schemes also invest beyond New Zealand shares, because the local sharemarket makes up less than 0.2 per cent of the global market.
When considering a switch, Littlewood believes fees are a big issue. "I would start with fees - it indicates whether managers care about their members."
But he admits fees are not easy to compare at the moment. "It's bloody hard."
That should change from next year when the government introduces industry-wide standards for reporting fees and performance.
Massey's Claire Matthews is also a proponent for looking closely at fees. "You can have a better performance but the fees can eat away at it."
But she also admits it's not easy for the average person to analyse the fees being charged, or who manages their money. "That's why it's good to get some advice on that."
However Matthews says getting advice on KiwiSaver is also not easy, and few people are prepared to pay for such guidance. "The problem is, it's easier said than done."
Industry spokesman Peter Neilson says savers should not put up with being charged high fees for a low risk or index-tracking investment portfolio.
But if they want customised management of their investment they will have to pay for it.
Neilson says he believes fees are important, but in the long run performance is more of an issue. "In the long run performance is more important than fees, but fees do matter."
ANZ's John Body says performance can have a major impact on savings over the long term.
"A 1 per cent difference in returns over 40 years could be the difference between a comfortable retirement and one that is not so comfortable."
New rules promise to ease task of comparing funds
By mid-July next year, savers will be able to find out exactly what the fees and performance returns are on their KiwiSaver fund and easily compare it with others.
New regulations, which are still being finalised, will set standards for reporting, making it compulsory for all retail schemes to make the information publicly available every three months, and in an annual report.
"It's been a long time coming," says Morningstar co-head of research Chris Douglas.
"It is a big change. It is going to be such a great move to get consistency in how providers report performance and fees."
The quarterly reports won't be sent out in paper form, unless requested by the saver, but will be available on the websites of fund providers and the Financial Markets Authority.
Douglas says that, realistically, he doesn't expect many people to get excited by the reports. "Most people don't even pay much attention to their annual account balance report."
But he says better disclosure will allow for comparisons, making it easier to analyse the different providers' KiwiSaver schemes.
Massey University's Claire Matthews says that whether the information is useful will come down to the presentation. She notes that banks are required to produce quarterly disclosure documents which must adhere to the same requirements but the information is presented in many different ways, making it harder to make comparisons. "You might get more information - but it might not be any easier to compare."
As proposed, providers will have to release the three-monthly reports within 10 working days of the end of each quarter of their tax year.
Peter Neilson, chairman of the Financial Services Council, an industry body for KiwiSaver providers, says fund providers already gather a lot of the information but it will take time to customise it for the general public.
Neilson says company directors are also cautious about approving numbers for release without external checks. "There is a little bit of pressure there."
* The performance figures cover all major KiwiSaver providers except Gareth Morgan and SuperLife, which do not take part in Morningstar's surveys, and some small providers.
Market share graph