KiwiSaver is celebrating its 9th birthday, so we thought it would be interesting to show how successful it has been at growing the retirement savings of New Zealanders while also highlighting what can be improved.

$14 billion. That’s the total amount of money invested by individuals since 2007.

$35 billion. That’s the total amount in KiwiSaver accounts as at June 2016.[1]

This means over the course of the last 9 years KiwiSaver investors have received a massive $21 billion in gains.

These gains are composed of $8b employer contributions, $7b government contributions and $6b net investment returns achieved by their KiwiSaver provider. The table below outlines these contributions.

Gross KiwiSaver contributions by year and type ($ million)


Source: IRD annual KiwiSaver Statistics 2016

Putting in $14 over the course 9 years and receiving $35 back, is a great deal. KiwiSaver has been an excellent vehicle to help grow and create additional retirement savings for a majority of New Zealanders.

So what needs to be improved?  In our view the biggest issue is too many KiwiSaver investors are simply in the wrong type of fund.

KiwiSaver investors in general have a very long investment timeframe. 79% of investors over age 18 have more than 10 years until they reach retirement. Yet only 30% of all KiwiSaver money is invested in Growth and Aggressive funds and a whopping 42% is invested in Conservative and Moderate funds.[2]

This is a big misalignment.

In general, over the long term growth funds should produce better returns than conservative funds, but the trade off is they’ll be more volatile. Since 79% of KiwiSaver investors have more than 10 years until retirement they have plenty of time to ride out the volatility of a growth fund.

Over the past 5 years, growth funds on average have delivered annual returns of 9.5% versus conservative funds on average delivering annual returns of 6.6%, after fees and before tax.[3] Even if a growth fund produces just 2-3% better returns annually, this could equate to tens of thousands of dollars more at retirement for the investor.

KiwiSaver has been a big success, but this is the one key area that needs to be improved. If KiwiSaver investors don’t begin to take notice of their choice of fund they will end up with a lot less money in retirement than they otherwise could have. It’s too late when you turn 65 to wish you had done better.

Sean Donovan

KiwiSaver Specialist

Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser. Milford Asset Management is a KiwiSaver plan provider. 

[1] Reserve Bank of New Zealand website. T43 KiwiSaver table.

[2] Morningstar Quarterly KiwiSaver Survey, June 2016 & IRD Annual KiwiSaver Statistics 2016.

[3] Morningstar Quarterly KiwiSaver Survey, June 2016.