KiwiSaver members who remain in conservative default funds could miss out on more than $500,000 in earnings over the course of their working life. 
CFFC’s Managing Editor of the Sorted website, Tom Hartmann, compared potential earnings of a member on an average wage if they remained in the default fund into which they were placed when they started work at 18, with what they could earn if they switched funds, corrected their tax rate and increased their contributions.
A person averaging $60,000 throughout their working life who remained in a conservative fund contributing the minimum of 3% and paying the top tax rate of 28% would end up with about $190,000 by the time they turned 65.
But if they switched to a growth fund, corrected their tax rate to 17.5% and increased their contributions to 10%, they would build a nest egg of $714,000.
Even if they left their contributions at 3% and tax rate at 28%, but switched to a growth fund, they would make $135,000 more and reach 65 with about $325,000.
Hartmann says the calculations showed the value of encouraging members to check in with their KiwiSaver account and making changes to suit them. He urged providers to be proactive in looking after their members' best interests.
"Inertia can be strong, and once we're placed in a default fund the motivation to check in and make changes if necessary can be low on our priority list," says Hartmann. "But as the figures show, a little bit of effort now will pay off big time in the future. Providers could earn a lot of goodwill by pointing their members in the right direction."
The calculations above include the employer's contribution of 3%, average investment returns for conservative and growth funds, and the annual government contribution of $521.
Sorted's Fund Finder tool was designed to help New Zealanders decide which sort of fund was right for them, depending on how soon they needed their savings and their appetite for risk. The Smart Investor tool, launched in 2018 by CFFC, the Financial Markets Authority and the Ministry of Business, Innovation and Employment, compared funds of the same type to find the best performers.