Most New Zealanders are familiar with KiwiSaver.

You may have had an account for many years, and if you’re an employee, you’ve likely been making contributions from your pay each payday.

Despite this, have you wondered how managed funds that aren’t KiwiSaver work?

Here are a few things to know about the difference between KiwiSaver and non-KiwiSaver managed funds, and how to make them work for you.

What are the benefits of KiwiSaver?

One of the biggest attractions in KiwiSaver is that it comes with some financial benefits.

When you join the scheme and make contributions, you’ll usually get a contribution from your employer that is equal to 3 percent of your gross salary too. Employers are required to match employees’ contributions at a rate of 3 percent, unless they have agreed to a “total remuneration” package or pay into an approved alternative workplace superannuation scheme.

If you are a qualifying contributor to KiwiSaver, the Government will also contribute 50c for every $1 you contribute, up to a maximum of $521.43 per year.

But what are the drawbacks?

KiwiSaver is designed to be a long-term saving solution.

Usually, you can only withdraw money from the scheme if you’re buying a first house or if you have reached the age of superannuation entitlement.

In some cases, you can apply to withdraw money if you’re in serious financial hardship.

Those limits on withdrawals can be a drawback if you have other goals for your investments.

What other options are there?

There are a wide range of non-KiwiSaver managed funds available.

Sometimes, they’re offered by KiwiSaver providers and are similar to the types of funds that are available through that fund manager’s KiwiSaver. You might have a growth fund, for example, that’s fairly similar to the KiwiSaver growth fund, but without the money being locked in.

There are other options, too. You can find managed funds that cater to a specific investment class (for example shares only), a geographic area (for example, Australiasia shares and bonds) or an investment scheme you’re interested in.

You can’t have your contributions taken from your pay in the same way as KiwiSaver, but you could still set up automatic payments to your investments, so you don’t have to make them manually each time.

Some people choose to set up a non-KiwiSaver managed fund investment in addition to their KiwiSaver. They use it to invest any money they have available to invest, beyond what their employer will match. This means they can still make the most of the benefits of regular investment, but aren’t locked in.

You may find that non-KiwiSaver managed funds require a minimum investment. We can help you understand what your options could be, depending on the amount you have to invest and your plans and goals for the future.

In general, managed fund fees are largely similar to KiwiSaver, but only KiwiSaver schemes have a statutory obligation not to charge an unreasonable fee. All fund managers are required to act in members’ best interests, and ensure members are treated fairly.

What’s suitable for you?

If you’re wondering about how non-KiwiSaver managed funds might fit into your financial strategy, get in touch with a SHARE Financial Adviser today.

We can help you look at what is available, what might be suitable for your circumstances, and which funds might align with your overall wealth-building picture.

Our expert team can provide tailored investment advice and help you with any questions you might have.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.