The average balance in the scheme is about $10,000 per member which is starting to get to be a significant number.
However, what compelled me to write this article is the sense that of all those 2.6 million members, only a fraction know who is managing their money, and what that money is invested in.
Do you know where your KiwiSaver is?
Why does this matter? Because (unless you're using KiwiSaver to save a deposit for your first home) KiwiSaver is a long term investment vehicle, the money will be put away for perhaps the next 10, 20 or even 30 years.
Through the miracle of compound interest, how that money is invested over that long time will make a big difference to how much you end up with when it comes time to retire.
Let's say you start on day one with $10,000 invested in your KiwiSaver fund, and you expect to retire in 25 years time.
If all of the money were invested in a "conservative" fund that invests in term deposits, let's say that fund earns 4 per cent a year over the next 25 years.
At the end of 25 years, you'll take out $26,658, roughly 2.5 times your original investment, not bad right?
However let's say instead of choosing that conservative fund, you choose a "growth" fund that invests exclusively in NZ shares.
Over the last 35 years, NZ shares have returned 11.4 per cent a year.
Let's say for the sake of argument that the fund earns 8 per cent a year over the next 25 years.
At the end of 25 years, you'll take out $68,485, or about seven time your original investment.
I think most people would agree that it would be nice to find $68,000 in your account at age 65, versus $26,000.
This example simplifies away differences in fund fees, tax treatment etc, and our assumptions about future returns may be wrong, but you get the picture.
This is what KiwiSaver commentators mean when they say many people's investment choices are "too conservative".
It means that by defaulting to a "conservative" setting, many people are giving up the potential for earning a much better return in the long run, even within a level of risk they can afford to take.
Generally KiwiSaver funds at the "conservative" end are heavily invested in cash, term deposit or other fixed interest instruments; as we move towards the more "growth" or "aggressive" end of the range, there are more shares in the mix, be that New Zealand, Australian or overseas equities.
The reason many people hide at the conservative end of the spectrum is because they don't understand what risks are involved in investing in shares, and so they're afraid to choose it.
Equities are still a less common investment for Kiwis (a distant second behind property) but for investors with a long term investment horizon, they are a very valid investment option and worth making an effort to understand.
With all the "sky is falling" headlines in the press this year, few people will know that the NZX50 Index has actually returned 8 per cent this year, as of the end of April.
There are some unbiased resources available to people who want to teach themselves about their investment options.
• Commission for Financial Capability (CFFC) website - articles and videos on investment basics.
• Sorted.org.nz - a CFFC website, with information, resources and tools for savers, including a comparison tool that will show you all your KiwiSaver fund choices, with historical returns, fees etc.
• Invested.co.nz (from NZX and CFFC) has a series of videos about investing in different asset classes, e.g. fixed interest, shares, managed funds.
Also, for regular readers of this paper, Mary Holm's advice column on Saturdays should be assigned reading.
She gives plain English, common sense answers to many common investment questions.
"Securing your financial future" can seem like an impossible mountain to climb, but every little bit counts, and as you can see above, by making some informed decisions today, you can make a difference to how you'll be placed in your golden years.
Amelia Wong is the CEO and Portfolio Manager of Constellation Capital Management, an absolute return fund manager investing in NZ and Australian listed equities. Constellation is not a KIwiSaver provider and is not a financial adviser. Constellation is open for investment by qualifying wholesale investors.
