Nope.
They’re definitely not. If you’re contributing to KiwiSaver, it’s best to choose a provider, and then a fund, that’s right for you.
A basic note on what is happening with your money.
The money saved away in your KiwiSaver account will become pretty substantial over time. If it sat in the bank, it wouldn’t earn very much interest at all. Most people want their KiwiSaver provider to be investing their money in things that will earn them a decent amount of interest.
By the way:
Provider = the company that looks after your money. Each provider has a number of funds (usually 3-5).
Fund = Where the provider pools all their client’s KiwiSaver money, and invests it in various different places (eg shares, property, term deposits, bonds).
First, choose your provider.
Each provider has a slightly different offering. Some will be a better fit for you, depending on your preferences.
The questions you should be asking:
How much am I comfortable paying in regular fees? This is a big one. KiwiSaver fees are big business, and some providers charge much more than others.
Where am I comfortable with my money being invested? Also important. Some providers invest more ethically and transparently than others, e.g. they refuse to invest in tobacco or mining companies.
What level of service do I expect? Do I want regular reviews, and updates about how my KiwiSaver is performing?
Then, choose your fund.
While all providers are different, their funds all follow the same general trend. They have:
A conservative fund: where your money is invested cautiously e.g. in big, stable companies or Government and Corporate bonds. You have less risk, but potentially less reward.
A growth fund: where your money is invested more aggressively, potentially in high growth companies. You have more risk, but potentially more reward.
A balanced fund: Somewhere in the middle. More risky than a conservative fund, but not as much risk as a growth fund.
You are able to split your KiwiSaver money across different funds. For example, someone may wish to have half their money in a balanced fund, and the other half in growth fund - In order to spread some of the risk.
Which fund you decide to go with totally depends on your circumstances.
A younger person may be more comfortable with risk, as they don’t plan to withdraw their KiwiSaver money until they’re 65 (They’re in it for the long haul).
At the same time, they may need that money soon for their first home, and therefore might not be willing to risk it in a high growth fund.
There are other factors to think about, like making sure your provider has your correct tax rate recorded. What does this mean? When your provider invests your KiwiSaver money, you will get returns on these investments. As with returns on all investments, these gains will be taxed. The amount you’re taxed depends on your yearly income. A common problem is that people are registered with an inaccurate rate. If you’re paying too much tax - i.e if your PIR rate is set to 28% instead of 17.5%, then we have a real problem. It’s not like other tax forms, this is final tax which means it’s non-refundable.
If you’re unsure, or just want a bit of help, we have a team of financial advisers on hand to help you choose the right one. The best part, their help is absolutely free.