What is Cash Fund?
A cash fund holds bank deposits and short-dated debt — the lowest-risk, lowest-return option in KiwiSaver.
Detailed Explanation
Cash funds typically have a risk indicator of 1 and aim to preserve capital with returns close to short-term interest rates. After fees and PIE tax, real (inflation-adjusted) returns are often near zero or slightly negative. Useful as a temporary parking place near a planned withdrawal — not a long-term wealth-building option.
Example
A cash fund might return 4–5% gross in a high-interest-rate environment, dropping to 1–2% in a low-rate environment.
Frequently Asked Questions
Is a cash fund safer than a bank account?
Lower-risk than equities but not a bank deposit — there is no Crown guarantee on KiwiSaver scheme balances.