The sharemarket is going up and down again; in other words, it's back to normal. But seeing your KiwiSaver balance go down for the first time in a while can be downright unnerving.
It's important to not panic and jump ship, especially if the boat is just riding a wave down and will eventually sail up again. Once you bail, you miss out on the eventual recovery.
If you've been contemplating a switch for other reasons, here are some considerations.
It's easy to switch between KiwiSaver options, and there are two ways to do it. You can either move to an entirely different KiwiSaver provider altogether and pick one of the funds they offer, or you can stay with the same provider and change to one of their other KiwiSaver funds.
Either way, one of the best ways to compare all your options in the market, or even just those your provider offers, is by using Sorted's KiwiSaver fund finder.
These may be good reasons to move to a new KiwiSaver provider:
• If it charges lower fees on funds with the same level of risk.
• If it offers better services and clearer communications with its members.
• If your current provider consistently makes returns well below average over the long term. But don't choose a new KiwiSaver provider solely on high returns, which will go up and down. Base your decision on their investment options, fees and services.
On the other hand, these may be bad reasons to jump ship:
• If you've read or heard that some other provider's funds have been making higher returns than your current fund – especially if it's just short-term returns.
• If a new provider has been recommended to you, but the recommendation came from someone who is rewarded if you transfer (like a bank or an adviser). Ask questions about this.
• If you're being pressured to switch over to your bank. A familiar brand isn't necessarily a good reason to shift.
Always check whether the new provider's fees, services and investment options suit you as well as your current scheme does.
If you do decide to change KiwiSaver providers, simply complete a membership form for the new one. They will tell Inland Revenue and arrange for your funds to be transferred, which typically takes between 10 and 35 days.
Some providers charge a transfer fee to move out of their scheme: Aon ($35), Booster ($30) and Superlife ($100).
Changing funds with your current provider
Stick with the same provider, but choose a different fund – here are some good reasons to head down this route:
• If you decide you can handle more ups and downs and you want the potentially higher returns of a riskier fund.
• If your fund's ups and downs worry you too much and you're thinking about moving to a lower-risk fund.
• If you're getting close to retirement, or planning to withdraw funds for a first home, and want to move to a lower-risk fund to reduce the chances that your balance will drop right before you need the money to spend.
A bad reason to change KiwiSaver funds would be:
• If you've read that another of your provider's funds has been making higher returns than your current fund. Again, the returns are like waves: they don't typically stay still, and you could be chasing something that's already gone.
Keep in mind that some KiwiSaver providers let you invest in more than one of their funds, so you could spread your contributions across multiple funds with different risk levels. But by doing this you are creating your own asset mix between funds, and it may be simpler to just find a fund that already has a mix that's right for you without doing the blending yourself.
The other thing to remember is that some providers have "life stages" options that adjust your investment mix automatically as you age, either by altering the fund you're in or distributing your money between funds of various risk levels.
The point is, switching isn't always the best choice, but for many it can be just the thing. Before you do, though, have a think first.