The Wrong Fund: Are you missing out on KiwiSaver money?

If your KiwiSaver money is in the wrong fund, you could be missing out on thousands of dollars. But how do you find the right fund for you?

It’s easy to find yourself in the wrong  fund, says James Paterson, a wealth adviser at Pie Funds.

You could end up there literally ‘by default’ – by being put into a default fund automatically chosen for you when you first join KiwiSaver. 

Or you could accidentally select the wrong fund for your timeframe and investment profile, without realising it.

“Quite simply, the wrong fund is one that’s not going to help you reach your goals and objectives,” says Paterson.

“Or it could be a bad fit with your investor profile, your tolerance for risk, or your investment timeframe.”

Default funds aren’t all bad

Paterson says default funds have had a bad rap lately, because they invest conservatively, but they aren’t all bad news.

“To start with, I think it’s great that people are getting into KiwiSaver – that’s the most important decision.

“For some people, being in a default fund or conservative investment vehicle will actually be the right fund.”

But most people starting out in KiwiSaver have many years before they need the money, so they can likely take on more investment risk.

If they stay in a conservative fund, they could miss out on the chance to get higher returns. 

The wrong fund makes a big difference

“Most young people will have a degree of tolerance for risk, so a conservative fund is clearly not going to be suitable.

“Potentially, this does have a significant bearing on what the end result looks like.”

He says you can see a big difference over the long term between a conservative and a growth fund.

The average growth fund in KiwiSaver has averaged around 8 per cent return over the past 10 years, compared to around 6 per cent for conservative funds. That’s even through the global financial crisis. This means you could end up with more money in your KiwiSaver account. 

“A 2 per cent difference a year over 10 years is significant. Over the lifetime of someone’s KiwiSaver journey, it would amount to tens of thousands of dollars, even hundreds of thousands.”

What if your fund is too aggressive for you?

Equally, you may find you’re in a fund that’s too ‘aggressive’, says Paterson.

An aggressive fund looks for higher returns by investing in assets that are exposed to more risks.

“I think it’s human nature to look at an investment that’s been running hot, for want of a better word, and put your money into that. Over the past five years, growth portfolios have been doing particularly well.”

But if you’re leaping into a growth fund, you may panic if there are fluctuations in the market. You might see your balance go down a bit. It’s common for investors to pull out at the wrong time, he says.

If you’re unsure, you can see a financial adviser, or talk to your provider. 

All about risk

If you do decide to take on more risk, remember:

  • Your returns could fluctuate – and sometimes go down dramatically.
  • Most KiwiSaver schemes are well diversified and spread your money across a range of different investments over many geographies and sectors. However, growth portfolios over the long term are likely to go up and down more than conservative investment portfolios.
  • Growth portfolios normally have higher fees.
  • By taking on higher risk, you’d expect to see better long-term returns.

Finally, one provider won’t tick all the boxes for you, warns Paterson. Look at their fees, communications, features, and investment policies. If you’re unsure about anything, talk to your provider. They are there to help you understand your KiwiSaver balance and how to get the most out of it.

What does risk mean?

Risk means the level of uncertainty you expect from your investment, which could include losing money.

Some things to remember about risk:

  • It’s not bad, it’s necessary
  • Risk is what you get paid for in returns
  • Risk is only bad if you take on too much or too little to meet your goals OR
  • You take on enough risk, but don’t get sufficient return to compensate you for that risk

Published August 2018

We aim to make investment with KiwiSaver easy to understand. To help us make this article reader friendly, we used The Write Plain Language Standard.

James Paterson is Head of Wealth at Pie Funds Management, the issuer of the JUNO KiwiSaver Scheme. You can read our Product Disclosure Statement here To access James’ Primary Disclosure Statement free of charge, visit

This article is general in nature only and has not taken into account any particular person’s objectives or circumstances. Before relying on it, we recommend you speak with a financial adviser. All content is correct at time of publication date.