Have you ever heard people talking about KiwiSaver default funds and wondered what they were referring to?

Or maybe you are in one, and wondering what that means for your investments.

Default funds are an important part of the KiwiSaver universe – but when it comes to putting your money somewhere, they aren’t always the right option.

Here’s the lowdown.

What’s a default fund, anyway?

A default fund is a fund that has been selected by the Government for people who have not chosen a provider when they join KiwiSaver.

When the scheme first started, this meant a huge flow of members into those schemes and a number of them have remained there.

In recent times, it’s been fewer and generally people who are new to the employment market.

Default providers are appointed for a term of seven years.

Since 2021, default funds have had to be balanced – that is, less volatile than a growth fund but with more exposure to the sorts of assets that should grow in value than a conservative fund.

The Financial Markets Authority says default funds have fees that are typically as low or lower than a conversative fund. They also have to exclude investments in some weapons and some investments that are linked to fossil fuels.

Who do they suit?

A balanced fund can be an appropriate option for some investors.

But the wider, and more important, issue is that KiwiSaver needs your attention to get optimum results.

If you simply take the fund that you land in, you might not consider checking whether your default fund will give the optimal outcome. If you have many years until you need your money, a higher-risk fund may deliver a better return.

It also likely means you haven’t considered whether you are contributing an appropriate amount to your fund, or thought about the investment balance you’re likely to be heading for.

Defaulting into a fund also means you haven’t considered which  provider might be a fit for you. Some have active investment strategies – which means they choose the assets they invest in – while others have a more passive style, in which they mirror the market. Some have more online tools than others, and some have funds that invest in particular types of assets or sectors of the economy which may appeal to different investors.

Put simply, a default fund is an okay place to be while you work out what you want to do with your KiwiSaver plan, but you should make an active choice about your investments before too long.

What are your options?

There are a number of tools that you can use to see what fund might suit you. Sorted offers a fund finder, and platforms such as Mindful Money enable you to delve into what funds might be investing in.

The team at SHARE can also talk to you about your options and help you work out which fund could be a good fit to get you closer to your investing goals.

Ready to take the next step?

If you’d like to chat about KiwiSaver, whether you’re wondering about changing providers, want to check you’re in the righty type of fund or just want to discuss what outcome you might be heading for, get in touch with us on 0508 2 SHARE (0508 274 273). Our team of expert advisers can answer your KiwiSaver questions and help you get the most out of the scheme.

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.