How to Switch KiwiSaver Providers or Funds

If you’re like many Kiwis, your KiwiSaver plan might just be a hazy concept chugging away in the background, rather than something you give much thought to.

However, it’s worth taking a moment to make sure you’re in the right KiwiSaver fund(s) and provider for you, as this plays a big part in your future wealth.

So, whether you’re looking to make a change and are sitting on the fence, or curious about switching KiwiSaver providers but unsure where to start, then look no further! We'll outline what switching KiwiSaver means, when you should do it and how straightforward it can be.

Spoiler alert: it's not difficult to switch!

Before we explain how it works behind the scenes, let’s tackle some KiwiSaver jargon and common features. Imagine us pushing a pair of spectacles up our nose...

• Provider: A common urban myth is that your KiwiSaver money is sitting with the government. But actually, only one of 39 licensed providers will be managing it - this includes us. This provider is chosen by you unless you don’t choose and are allocated one by default.

• Scheme/plan: You can think of a KiwiSaver ‘scheme’ or ‘plan’ as the overarching account offered by a provider. Say to yourself “I am joining the Kernel KiwiSaver Plan.”

• Offer: Within a plan, there is an ‘offer’ - this is a selection of investment options that you can choose from within the plan, offered by the provider. Commonly, you can choose between 'offers' often labelled as 'Conservative', 'Balanced', or 'Growth'. You can see the important details in a document called the Product Disclosure Statement.

• Strategy: Some providers including Kernel, allow you to choose multiple offers (funds) to comprise your investment, this is known as your strategy or portfolio. This is different from the investment strategy of the fund, which is what it is trying to achieve.

When it comes to KiwiSaver there are two switches you can make (which, of course, you can also make simultaneously):

1. Switching between providers

2. Switching between offers/strategies (investment funds)

If you’re unhappy with your current KiwiSaver provider, or you think you might find a plan elsewhere that’s better aligned with your goals, values, or knowledge, then it might be time to switch providers.

It may be time to switch between strategies if your circumstances have changed, for example going from a cash fund to a high-growth fund after buying your first home.

Let’s dig into switching a little bit more…

We’re not advocates for consistently changing KiwiSaver funds or changing due to news, past or perceived market conditions, but rather when your personal circumstances change. By that we mean, most commonly when you approach one of two main life events - a first home purchase or reaching retirement age.

Purchasing your first home or reaching retirement age are also the two points from which you can withdraw your KiwiSaver balance. As you get closer to either of these, you may want to lower the risk profile of the fund you’re in.

For example, if you’re planning to buy your first home in the next few years and want to use your KiwiSaver balance as part of the deposit, then you typically wouldn’t want to be in a high growth fund - instead, consider a fund likely to fluctuate less such as a cash fund.

Similarly, if you have recently bought your first home and are now working towards retirement, a goal 40+ years away, you won’t be able to access your KiwiSaver balance for decades. You might want to then consider changing to a high-growth fund, with a new long-term time horizon.

Ultimately the choice to move KiwiSaver providers comes down to your personal preference and values. Here are a few questions to consider when thinking about switching:

For most of us, a KiwiSaver investment will be for the long term. Consider the type of investment style that you prefer to be managing your money over that time. E.g., do you prefer a passive or active fund manager? 

You may also want the flexibility to adjust the investment strategy to suit your specific needs and tastes. Be it control over your investment mix, or flexibility to pick a strategy based on your values, for example,  ESG or sustainable investing strategies.

Fees have a big impact on investment returns over time, so make sure you compare all the fees (and taxes) you pay with your current provider against the provider you’re considering.

No one can control the performance of the market, and being with a higher fee provider has not proven to lead to better results - in fact, it’s usually the opposite.

Another ‘what not to do’ - don’t switch to a new provider simply because it had a better return last year. The most common saying in finance is “past performance is no indicator of future performance.”

Persistently high returns are very rare, as no one can control or predict returns. Focus on what you can control, e.g., fees, as this will set you up for the best long-term success.

A lot of investors often hesitate to change KiwiSaver providers, fearing they'll lock in any losses. However, if you move to a different provider with better diversification and an offer or strategy with a similar or slightly higher risk level. You shouldn't be overly concerned about locking in potential financial losses.

It will even work in your favour. Just ensure this change suits your circumstances, preferences and goals.

There are now 39 different KiwiSaver providers in New Zealand, from legacy providers (the big banks) to new and innovative disruptors. When looking for your next provider, it pays to do your research and evaluate options aligned with you.

When considering your next provider, look for independent resources such as Money Hub, Money King NZ and Sorted's Fund Finder.

Switching KiwiSaver providers is generally very easy and only takes minutes.

Once you’ve decided on a new KiwiSaver provider, simply open an account with that provider to get started. This can usually be done online, and you’ll need to allow about 5 to 10 minutes to complete the process. You’ll also need:

1. A valid email address

2. NZ driver's licence or passport

3. Your Inland Revenue Department (IRD) number, and;

4. Your current residential address to set up an account.

Once you have opened the account with your new preferred KiwiSaver provider, they’ll do the rest. You don’t even need to close your previous account.

Behind the scenes, the IRD will be notified of the request and a notice to your current provider will be sent. Then finally, the transfer process will begin.

As soon as the request to switch providers is delivered to the IRD they will change the provider status in their records.

Your KiwiSaver contributions will now automatically be sent to your new KiwiSaver provider. Then it is just a matter of waiting for your existing KiwiSaver balance to transfer over from your previous provider.

Are you new to Kernel and want to transfer your KiwiSaver balance to the Kernel KiwiSaver Plan?

You will first need to set up your Kernel account and complete our verification process. Once verified, you can find the option to 'Transfer your KiwiSaver' in the Kernel dashboard.

It's that easy.

Want to learn more about the Kernel KiwiSaver Plan? Head to the link below to get started.