Watching your KiwiSaver investment can sometimes be frustrating, particularly if it’s not growing in the way you want. Occasionally this means it’s time to switch your KiwiSaver provider – but not always.
Was their poor performance outside of anyone’s control, or is it a sign that you should switch? It’s important to know the difference. So when should you consider changing your KiwiSaver provider?
When to consider switching
There are some legitimate reasons to consider switching KiwSaver providers. These are:
- Long-term poor fund performance: KiwiSaver fund performance is what makes your investment grow. Put simply, the better the performance, the more money you’ll have at retirement. If your current provider is consistently performing below the average of its peers, it could be a sign that you should switch. However, remember that past performance should be considered over at least the last five to ten years; a poor financial quarter or year may not be something to worry about because short-term results can be quite variable. Also, remember that KiwiSaver funds report their fund performance after fees have been deducted. This means if your fund performance is below average, you’re getting poor value for the fees you’re paying.
- Poor communication: Communication with and visibility over your KiwiSaver account is essential to make sure you’re up to date with your investment. If your provider is poor at making regular contact and you feel like you have an inadequate understanding of how your KiwiSaver account is being managed, this could be a major red flag.
- Poor service: Your provider should respond to your calls and emails quickly. They should arm you with online tools to help you understand if your investment is on-track for retirement. And they should offer you insights into how they’re investing your money.
Don’t switch too often
While there are some clear factors that indicate when switching KiwiSaver will benefit you, it’s not something you should be doing regularly or without clear cause.
Research new providers carefully
If you are considering switching providers it’s important that you research potential candidates very carefully. When looking at providers check:
- Their investment strategy.
- How much and how well they communicate with their clients.
- What their fees are and whether they match the value you will receive.
- Past performance, if possible over at least the past five to ten years.
Focus on the long term
Chasing short-term returns and switching to last year’s top performing fund is tempting but it could be a big investment mistake. You’re better to look at your KiwiSaver provider’s long-term performance and if they’re a chronic under-performer, that could be reasonable grounds for switching.
If you are considering switching KiwiSaver providers, consider joining the award-winning Milford KiwiSaver Plan. You can join or switch in just a few minutes by visiting our online application form today.