KiwiSaver advice from Jennie O'Donovan

Written by: Susanna Andrew

Hands up who isn’t really paying attention to the KiwiSaver section of their payslip? Passive vs active, PIEs (not the mince and cheese kind) and PIRs, KiwiSaver expert Jennie O’Donovan from Simplicity answers some straightforward questions on the retirement savings scheme we all have (or ought to have).


What’s the buzz about passive vs active funds in KiwiSaver?

Active investing involves fund managers picking specific investments, while passive investing follows an existing index, like the S&P 500 or NZX50. Active investing might promise short-term highs, but it generally involves higher costs and risks. On the flip side, passive investing aims for consistent returns with lower costs. Studies suggest that in the long run, passive investing tends to outshine active investing for most fund managers. Check out the SPIVA Institutional Scorecard at www. for some fascinating insights!


Do all KiwiSaver providers charge the same fees?

Nope! KiwiSaver fees vary among the 38 providers. Some charge membership or admin fees, while others have performance-based fees and additional charges. The annual investment management fee, usually a percentage of your balance, is the big one. Fees can range from 0.25% to over 2% per annum, averaging around 1.2%. Small amounts, right? But consider this: with a $50,000 balance, a 0.25% fee is $125 a year, while a 2% fee hits $1000. Those fees add up, especially when they cut into potential returns.


Can I splash out on my KiwiSaver fund whenever I fancy?

KiwiSaver is a long-term savings gig, meant for retirement. With very limited exceptions, it’s locked until you hit 65. At that point, you can grab your savings in a lump sum, make withdrawals as needed, or set up regular payouts. Certain life events, like buying your first NZ home, health issues, financial hardship, or jetting off overseas permanently (except to Aus), might let you dip into your KiwiSaver stash. But remember, the rules are strict.


Are KiwiSaver funds a tax-free party?

Tax and KiwiSaver can sound like a tax headache, but let’s keep it simple. KiwiSaver isn’t tax-free. Contributions, including your employer’s, get taxed before they hit your account. But, once in your KiwiSaver fund, only investment returns are subject to tax. So, if your $10,000 grows $500, you’re only taxed on the $500 gain. How much you pay depends on your scheme; most are what we call Portfolio Investment Entities (PIEs), and the tax is the Prescribed Investor Rate (PIR) – which is based on your income bracket. Simple, right?


If I roll with Simplicity, do you handle my money or outsource it?

Simplicity doesn’t hold your investments directly. An independent custodian holds the money on behalf of investors but Simplicity makes the investment decisions (the same goes for all KiwiSaver managers – so if one goes under, investments are protected so a new manager can take over). Each fund manager adopts their own investment style. Simplicity invests in a predominantly passive way, tracking indices for most investments, and overlays ethical considerations (like excluding fossil fuels).

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Sarah’s aunt bequeathed her $60,000 in her Will. Sarah had never accumulated substantial savings beyond her KiwiSaver fund, and wanted some tips on making wise investment decisions. We turned to Liv Lewis-Long at Simplicity, posing five questions that could potentially help shape Sarah’s financial future.

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