An online KiwiSaver advice firm says KiwiSaver members who have recently changed funds are likely to miss out on $3.5 billion in retirement.
In the quarter ending March, approximately 3.74 per cent of members from KiwiSaver growth funds and 3.01 per cent of KiwiSaver members in balanced funds switched into more conservative funds.
This choice has the potential to reduce collective investment gains by up to $3.5 billion if members remain where they are, according to NationalCapital.co.nz.
The loss equates to $925,664,182 in 10 years from now or $3,578,215,119 in 20 years - the equivalent of an estimated $20,580 per person over 10 years or $80,726 in 20 years.
Clive Fernandes, director of NationalCapital.co.nz, said 50,000 New Zealanders changed their KiwiSaver fund when Covid-19 hit and balances were falling.
But he said the "real danger" was not what had already been lost due to market upheaval, but rather future returns.
"When Covid-19 hit, fuelled by declining KiwiSaver balances, misinformation and a lack of advice, an estimated 50,000 Kiwis panicked and moved, with most moving into a more conservative fund under the guise that they would be minimising further losses. The longer these members stay out of Growth/Balanced funds, the bigger the potential loss."
The hardest hit funds were two of the biggest; Westpac Growth and ASB Growth which lost 6.87 per cent and 6.4 per cent of their investor base in the March 2020 quarter, research by NationalCapital.co.nz found.
The growth funds which took the smallest hit were Mercer Growth, which gained 2.3 per cent of its investor base and Milford Active Growth which only lost 0.4 per cent of their investor base.
Evidence from past economic downturns, including the 1987 crash, shows that when investors without advice or support lose money they tend to be very slow to coming back to the markets, if at all.
"These figures show those KiwiSaver members who had greater access to advice were less inclined to switch, suggesting the value of advice - quite literally - particularly in a time of uncertainty," Clive said.
He believes KiwiSaver providers need to add 'access to advice' as part of their service offering and fee structure.
"We need to ensure that Kiwis end up better off in the long run. Just aiming to have the lowest fees to attract new clients is not in the long term interest of KiwiSaver members. The Industry, FMA and the Government need to take the 'value of advice' into consideration; and not just have a myopic focus on fees," Clive said.