There has been a lot of talk about KiwiSaver accounts due to the volatility over the last couple of years. Many people have seen their balances go up and down, sometimes quite dramatically. If you're confused about how KiwiSaver works, we've busted some common myths.
5. The government will steal my money. KiwiSaver is a scam.
Your KiwiSaver account is your account. No one else can touch it, it’s in your name and it’s your money. The money can’t be stolen by the government. And it's not a scam.
All KiwiSaver providers are licensed by the Financial Markets Authority. Being licensed means they have met minimum standards and are proactively supervised and monitored by the FMA as part of the terms of their licence.
All KiwiSaver providers also have a licensed supervisor. The licensed supervisor is there to ensure the KiwiSaver provider meets its legal obligations.
Since KiwiSaver was launched, some schemes have closed, for a variety of reasons. All their members were transferred to other providers, and no one lost any money because of the transfer.
4. The government is just investing money into their own businesses, so they get profits
The government can’t use the money in your KiwiSaver account.
The money goes from your pay to the Inland Revenue Department, which makes sure it goes to the scheme you’ve chosen, or the scheme you’ve been assigned to through the default system.
The money is then invested on your behalf by the fund manager. As a KiwiSaver member, it’s you who gets your share of the profits made on the investments, not the government.
3. I can’t change my KiwiSaver provider
This is a common misunderstanding about KiwiSaver – people don’t realise you can pick who invests your money for you.
When you first join KiwiSaver, you’ll be automatically put into one of six default schemes by the Inland Revenue Department (IRD) (or your employer's preferred provider) and your money will be invested into that provider’s default fund, which is usually a balanced fund.
But at JUNO, we encourage you to do a bit of research and find the KiwiSaver provider right for you, so your money is invested to suit your life stage and how comfortable you are with risk.
If you want to change providers, just contact the one you want to join.
2. My money is with KiwiSaver
Often people think their money’s with ‘KiwiSaver’.
It’s easy to see how confusion occurs. If you’re contributing money to a KiwiSaver account, you’re enrolled in KiwiSaver. But your money is managed by whoever you’ve chosen to be your provider, or wherever you’ve been defaulted by the IRD.
It’s important to understand while your money is invested through a government scheme – KiwiSaver – it is not invested by the government and is not guaranteed by the government, either.
Here at JUNO, Pie Funds is the manager of the JUNO KiwiSaver Scheme. But your money isn’t physically at Pie Funds, it’s held by a big bank – called a ‘custodian’ – which controls and maintains an independent record of what goes into and out of your account.
1. I don’t get charged fees
If you’re contributing money into a KiwiSaver account, it’s very likely you’ll be charged fees.
Sometimes it’s hard to find out how much you’re paying in fees on your KiwiSaver balance, and fees often have different names (such as membership, performance or management fees). Some of the fees are also percentages, which can make it hard to work out the amount you’re paying in dollars (which, over a period of years, can be a lot).
At JUNO, we encourage all KiwiSaver members to find out what they’re paying in fees, and make sure they’re happy with what they’re getting in return.
But you need returns to hit your investing goals too. Even if you’re not being charged fees, no returns means you have nothing to show for your savings.
You can’t think of returns and fees separately. Returns may vary, but fees always happen. It’s very hard for returns to be consistently good over long periods. So, our answer is, any investor needs to consider both fees and returns when they’re looking at their investments. Take a look at both of them regularly (at least when your annual statement arrives), compare, and make sure you’re happy. If you’re not, take that hard-earned money somewhere else.
Information correct as at July 2022. Pie Funds Management Limited is the issuer and manager of the JUNO KiwiSaver Scheme. Click here for our Product Disclosure Statement. Any advice is given by Pie Funds Management Limited, and is general only. It relates only to the specific financial products mentioned and does not account for personal circumstances or financial goals. Please see a financial adviser for tailored advice. You may have to pay product or other fees if you act on any advice. As manager of the Scheme we receive monthly fees that are determined by your balance and whether you are 13 years or over. We will benefit financially if you invest in our products. We manage any conflicts of interest via an internal compliance framework designed to ensure we meet our duties to you. For information about the advice we can provide, our duties and complaint process and how disputes can be resolved, visit www.junofunds.co.nz. All content is correct at time of publication date, unless otherwise indicated. Past performance is not a guarantee of future returns. Returns can be negative as well as positive and returns over different periods may vary. Please let us know if you would like a hard copy of this disclosure information.