The KiwiSaver Default Fund Dilemma
According to the Financial Market Association’s 2024 KiwiSaver Annual Report, KiwiSaver membership has risen to an impressive 3,334,654, marking a 2% increase year on year. However, 10.2% of these members remain in default allocated funds, which raises an important question: what does this mean for your retirement savings?
Understanding Default Funds
When you joined KiwiSaver, if you did not choose a specific fund, you were placed in a default fund. These funds have a balanced investment mandate, meaning they carry a medium level of risk. While this might seem convenient, default funds do not consider individual factors such as risk tolerance, investment timeframe, or ethical investing preferences.
The Default Fund Reality
A significant majority of KiwiSaver members (2,993,812) have actively chosen their own provider and fund, customising their retirement savings to meet their individual needs. However, over 340,000 members remain in default funds.
The average balance for those in default funds is $9,937, which is roughly one quarter of the active KiwiSaver members' average balance of $36,199.
This stark contrast highlights the importance of taking initiative; actively managing your KiwiSaver can lead to significantly better financial outcomes.
Why You Should Take Action
Personalising your KiwiSaver investment can significantly impact your retirement. Everyone's financial situation, risk tolerance, and goals are unique. Default funds may suit some, but they may not align with your aspirations.
Consider your investment preferences: do you prefer a conservative approach, or are you willing to embrace more risk for potentially greater returns? By selecting your own fund, you gain the power to choose an investment strategy that fits your needs. Whether you're a conservative investor or someone ready to ride the market waves, there’s a fund tailored just for you.
Conclusion
While staying in a default KiwiSaver fund might feel like the easy choice, it’s crucial to evaluate whether it serves your best interests. With membership numbers growing and more Kiwis taking charge of their savings, now is the perfect time to reassess your options.
Your retirement is important - don’t leave it to chance. Embrace the opportunity to make your KiwiSaver work for you, and watch your savings flourish. The decisions you make today could have a lasting impact on your financial future!
