A group of financial advisors claim that some 440,000 KiwiSavers have missed out on approximately $1 billion over the last six years.
The group, headed by financial adviser John Cliffe, say that many KiwiSavers had the potential to earn significantly more money if their funds had invested in higher risk, higher return growth funds.
The current settings for the KiwiSaver programme start in a “default fund” which is essentially a low risk fund.
The problem is systemic and it’s been going on for a long time.
Mr Cliffe told RadioLIVE that the default funds were designed as “temporary holding places” where people would then switch to an appropriate fund. But for many Kiwis, their fund was never switched to one better designed for their goals.
“The temporary holding place has unfortunately become a permanent place, where too many people are sitting and effectively what they’re doing is sitting on a very conservative fund which is not earning as much,” he said.
According to the Mr Cliffe, most of the default fund money has been invested in deposits at the big, Australian-run banks that ran the schemes.
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“The problem is systemic and it’s been going on for a long time,” he told RadioLIVE.
Mr Cliffe and seven other advisors have written an open letter to the Government, including Finance Minister Grant Robertson, with details on their call to overhaul KiwiSaver to better serve the public.
Mr Cliffe advises that New Zealanders use their IRD number to ask the Inland Revenue Department for information about their KiwiSaver. He recommends switching to a balanced fund for those who won’t be drawing any money out in the next 3-4 years, and a growth fund for anyone under 40 years old.
Listen to the full interview with John Cliffe above.
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