KiwiSaver is an easy way to invest. Your contributions are deducted automatically, along with the contributions from your employer, and every year the Government pays you a tax credit. You could argue that KiwiSaver is a ‘set and forget’ type of investment. However, paying little or no attention to your KiwiSaver is not wise. There is a great deal of variation between providers and between the different types of funds. For younger members, KiwiSaver is likely to be their biggest investment asset by the time they retire. Over the long term even a small difference in the annual rate of return between funds will add up to significant difference in the amount of capital at retirement. Tracking your KiwiSaver is essential to get the best return over time.
The Financial Markets Authority has launched a new online tool called the KiwiSaver Tracker. It is designed to help people understand the relationship between investment risk, investment returns and fees. It shows for the last year and the last five years:
- The risk profile, returns and fees for each KiwiSaver fund
- A percentage figure for how much of the return is paid to the fund manager in fees
The data shows that KiwiSaver funds with a higher exposure to growth assets (property and shares) have a higher rate of return over a five year period. However, there is no obvious linkage between fees and return. High fees do not necessarily mean a lower net return for the investor; nor do low fees imply a higher net return. The most important decision for KiwiSavers will always be the choice of fund (that is, the weighting of growth assets). Historical net returns after fees are more important than fees when choosing a fund, however past returns are no guarantee of future performance.