You would think after more than a decade, Kiwis would understand KiwiSaver. Yet we're still confused.

I watch social media discussions about KiwiSaver and sadly much of what I read is based on rumour or a case of a very vociferous group of blind leading the blind.

The fallacies don't help Kiwis truly understand their investment.


Some of the confusion include:

It's not a savings account

KiwiSaver is an investment, yet the Financial Markets Authority still finds people are confused when it surveys them.

Your provider manages your money on your behalf in a wide range of investments. It's locked in and you can't withdraw it because you feel like it – unless you're aged 65, buying a first home or in some cases facing hardship.

You won't receive a king's ransom at retirement

This opinion is too common, says Sam Stubbs, founder of Simplicity KiwiSaver, and is also shared by people on contribution breaks or paying the bare minimum on a low income.

Stubbs says they look at the results from their provider's calculator and see they'll have a big sum when they retire. But most don't take into account tax, inflation and realistic level of investment growth.

Some calculate 10 per cent net growth, which is never going to be the average over a lifetime of investing, he points out.

The mis-named "member tax credits"

The Herald columnist Mary Holm has received hundreds of letters about KiwiSaver over the years and says one of the big confusions she still sees is over member tax credits.

This is the $521.43 that the government adds to your account if you've saved at least $1043 in the year.


Too many people see the word tax and think because they don't work/pay tax they don't qualify, says Holm.

Non-working spouses are a good example. The family may have the money to contribute, but doesn't and misses out. Personally I think should be called a KiwiSaver bonus, which is what it is.

KiwiSaver funds don't grow at an even rate and can fall

Sooner or later, and many commentators think it's sooner, the value of KiwiSaver funds will take a temporary, but possibly dramatic dive.

There will be howls on social media about how Kiwis were sold a crock. No matter what they say, savers often can't stomach a sudden drop in the paper value of their investments, says Binu Paul, founder of financial comparison website

As soon as there is a bad period they run helter skelter. That can mean switching to a conservative fund after the fall has happened, and therefore crystallising their losses.

"On the assumption you were in the right fund in the first place your (long-term investment) shouldn't be affected by market falls," he says.

The idea here is that volatility where markets bounce up and down doesn't affect long-term investments because by the time you need the money the investments have long recovered and gone on to make great gains.

It's all about timeframe. In the case of the global financial crisis, that rebound took around two years.

The FMA has produced a quiz for Money Week that ends today to help educate us on this subject at

It's not government guaranteed

This is a myth that also arises in FMA surveys of the public. The providers are banks and other financial services businesses.

They have to jump through hoops to become a provider and get hauled over the coals if their systems and practices aren't up to scratch.

They also have independent trustees (supervisors) who monitor them. What's more, it would be very difficult to lose all your money because with most funds it's invested very widely in a variety of markets, which don't all crash at the same time, and more importantly never lose all their value.

It's not like your money is in one company and dependent on one or a handful of directors' management. It's held at arm's length.

A provider such as ANZ or Generate can't help itself to your money if it gets into financial trouble.

A related confusion is that the government has your money and could just keep it. It doesn't. Employees' KiwiSaver contributions are deducted and sent to the Inland Revenue Department briefly but then passed on to the banks and other providers to be invested.

It needs to be said that there are changes from time to time in how KiwiSaver works.

Default providers are appraised every few years and the Retirement Commission reviews KiwiSaver every three years and can make non-binding recommendations for change.

Some of the recommendations from its 2016 review are in the process of becoming law. That includes adding added two new contribution rates and allowing people over 65 years to join.