KiwiSavers moved $1.4 billion into cash and conservative funds in March - a move which one provider says shows how people panicked during the peak of the markets crashing as the Covid-19 coronavirus spread.
Fund under management in KiwiSaver fell from $63.6b as of the end of December to $59.1b at the end of March with Covid-19 wiping $4.5b off the value of the funds.
Murray Harris, head of KiwiSaver at Milford Asset Management, said data showed around 2 per cent of that money flowed into cash and conservative funds.
"$1.4 billion is a lot more than we would normally get."
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While some of that would be new members signing up to KiwiSaver cash and conservative funds Harris believed the "vast majority" would be people switching money from higher risk balanced and growth funds as they panicked at the sight of their balances falling.
"It is only around 2 per cent which is small in the scheme of things. But we know from experience, many wait until the market rebounds before switching back or they never switch back."
Waiting meant those investors were selling their investments at a low point and buying in at a higher point which goes against investment common sense.
"They typically wait for the market to recover and then get back in."
Harris said a case study he did for a presentation on KiwiSaver behaviour in the wake of the market falls, revealed a 35-year-old on an average income of $55k with a balance of $20k would potentially have $32,530 less in their account if they switched from a growth fund to a conservative fund and then waited two years to switch back.
The financial hit was even bigger for those who stayed in a conservative fund until age 65.
Modelling of the same 35-year-old showed the person could have $370,940 less in retirement savings at 65 if they stayed in a conservative fund.
"The financial impact is significant over a long period of time. That is why it is so important to get advice. These are one thousand dollar decisions."
Harris said it saw 6 per cent of its members move into cash and conservative funds during March but it had a higher percentage of members in its growth and aggressive funds than other providers.
"It was a bit higher than I would have expected," he said.
But Milford also saw 2.5 per cent moving into higher risk balanced and growth funds as they took advantage of lower asset prices.
"They are seeing it as a buying opportunity."
And it seems some non-KiwiSaver members also saw it as a buying opportunity.
Sharesies co-founder and co-chief executive Leighton Roberts, said in the CFA Society panel presentation that it had seen significant membership growth over the last eight weeks from around 100,000 members to 150,000.
"We knew there was a lot of people that signing up was something they were going to get around to and this has been the catalyst for them to do that."
Roberts said when volatility in the market got high it began to see a material increase in sign-ups and then again at the market began to recover and people worried they would miss out on the sharemarket returns.
Trading volumes began to track a lot higher just as the country moved into level 3.
He said one of the things driving the behaviour was the view that there was nothing else to invest in with bank rates down and the official cash rate cut to a record low of 0.25 per cent.
"Interest rates dropping down so low you are lucky to get anything in a savings account, certainly not a place to grow your wealth."
Housing was still an aspiration of its customers with 75 per cent not owning a home and many would be hoping that the property market would stagnate or drop giving them an opportunity to get on the property ladder.
The growth in new members had also seen a change in its membership. Previously it had a lump that were mainly aged 25 to 35 while there were now more in the 45 to 55 year age group.
It had also seen more males joining up where as in the past its membership was 50-50 men and women, it was now 55 per cent men and 45 per cent women.
Harris said the biggest lessons to learn from the situation was for KiwiSaver members to make sure they were in the right risk profile before investing or joining.
"Go to your providers website, most have a risk profile tool with five to seven questions to answer. That will help guide you."
"If you are still not sure get some advice." That could be from a KiwiSaver provider or a financial adviser, he said.
Once you are in the right fund stick with it through the markets ups and downs and if you find you are in the wrong fund switch as soon as possible.
It's not the first time KiwiSaver funds have been hit by a drop in the markets. In December 2018 there was also a fall over the quarter.
Harris said there was also switching that took place then but this time had been greater because of the depth and speed of the market fall.
"It caused a lot more panic."
"This was a health crisis so everyone knew about it."
The December 2018 fall was a more gradual decline over three months and fewer people may have been aware of it.
When KiwiSaver launched in 2007 it was just before the Global Financial Crisis hit the markets.
But Harris said there were far less people in KiwiSaver and average balances were less than $3k.
Now the scheme has more than three million members with balances average around $20k.
"That is getting to be a significant amount of money."
That meant when markets fell people saw KiwiSaver balances fall by thousands of dollars.
"There is a tendency to panic as the number gets higher. But it is more important to stay the course as balances get higher," he said.