Consumer Watch: KiwiSaver funds laid bare

Retirement Commissioner Diane Maxwell is setting up an online service to help investors switch funds. Photo / NZ Listener

New service will simplify options for investment

Help is on the way for the more than half a million people who invested in KiwiSaver with no idea about the fund their money is in. It is a decision that could cost them hundreds of thousands of dollars in returns.

Retirement commissioner Diane Maxwell is launching a new online tool, KiwiSaver Fund Finder, to help savers compare funds' fees, service rating, returns and switch fees. It will be live by year's end.

It is made possible by new disclosure requirements for KiwiSaver providers in which they must deliver quarterly standardised reports.

The Productivity Commission had previously suggested running something like the "What's My Number" campaign, which resulted in about 30 per cent more people changing their electricity provider in its first year.

"One example of a service market where there may be scope for similar intervention is the KiwiSaver funds management," the commission said.

Commission for Financial Literacy and Retirement Income spokesman David Kneebone said KiwiSaver was not among most people's priorities.

His team had met the Productivity Commission this week to discuss that report and the tool being developed. "This will satisfy some of that need."

Investors should not look at historic returns as a gauge for the future and fees were a significant part of any decision, he said.

About a quarter of all KiwiSaver members are still in the default schemes they were automatically enrolled in. These are invested conservatively, which usually suits older investors best, and returns are usually lower over a long time. Default schemes returned between 5.3 per cent and 6.8 per cent in the year ended June, compared with up to 26 per cent for aggressive funds.

Milton Jennings, CEO of Fidelity Life, which sold its KiwiSaver business to Grosvenor, said any tools that helped people understand their investments were useful. "Now balances are starting to grow, people are taking more of an interest."

He said it was important to understand that high-risk investments, such as equities, involved periods of correction as well strong growth.