Why you can't trust KiwiSaver calculators

KiwiSaver members are being warned to be wary of forecasts made by online calculators. Photo/Supplied.

There is a vast difference between how KiwiSaver providers are calculating how much money a person will have in retirement and one provider has labelled it "inconsistent and misleading."

Research by Simplicity has found the projections for a how much a person could have at retirement can vary from $311,000 to $1.36 million depending on which provider's calculator they use.

The figures were based on a 20 year old earning $40k and contributing 3 per cent themselves and 3 per cent from their employer investing in a growth fund.

For a balanced fund the difference between providers was $357k to $775.

Sam Stubbs, managing director of Simplicity, said its findings showed the results produced by online calculators were inconsistent, misleading and of very little use to a person trying to project their future retirement income.

"It's concerning ordinary KiwiSavers might rely on these projections," he said.

Stubbs said providers should either use a standard set of assumptions set by the government or have an actuary sign off on the figures.

The Ministry of Business, Innovation and Employment is in the process of finalising how KiwiSaver retirement savings and income projections will be calculated for inclusion in annual member statements.

If approved by Cabinet these changes would become compulsory for KiwiSaver provider statements from 2020.

Stubbs said providers should have to use a standard set of assumptions in all marketing used to forecast a member's future wealth.

He also urged providers to use figures that were both before and after inflation to show people the future purchasing of their money and tax should be applied at the member's rate rather than using the top rate of 28 per cent.