12 KiwiSaver Myths Debunked
Twelve of the most common KiwiSaver misconceptions, paired with the sourced fact from IRD, FMA, or Sorted. Use this page to test claims you hear at the pub, on social media, or from a well-meaning relative.
General Information Only: This page provides factual data for comparison purposes and does not constitute financial advice. Individual circumstances vary.Read our disclosure
KiwiSaver is locked up until you're 65 and you can never touch it.
Members can withdraw earlier in five defined cases: first-home purchase (after 3 years of membership), significant financial hardship, serious illness, life-shortening congenital condition, and permanent emigration to a country other than Australia. Permanent emigrants to Australia can transfer the balance into an Australian super fund instead.
Source: IRD — KiwiSaver withdrawals
The default fund is the safe choice.
Default funds were rebased to a balanced mandate in 2021. They are no longer conservative. Default-fund members are auto-allocated, which is appropriate for some but not all timeframes. Members can switch fund or provider at any time at no cost via their provider.
Higher fees mean better returns.
FMA's KiwiSaver Tracker reports that there is no consistent link between higher fees and higher net returns over multi-year periods. Differences in fees, when compounded over decades, often outweigh the gross return differences between active and passive funds.
Switching providers triggers tax or fees.
Transferring between KiwiSaver schemes is free and is not a taxable event. Some funds charge a small buy/sell spread (typically 0.05%–0.30%) on entry or exit, disclosed in the PDS. There is no provider lock-in beyond the time the new provider takes to process the transfer (typically 10 working days).
If my provider fails, I lose my money.
KiwiSaver assets are held by an independent trustee/supervisor on behalf of members, separately from the manager's own assets. If a manager fails, the supervisor appoints a replacement and the assets remain ring-fenced. KiwiSaver is regulated under the Financial Markets Conduct Act 2013.
Source: FMA — KiwiSaver supervision
I can't join KiwiSaver if I'm self-employed.
Self-employed people, contractors, sole traders, and even people with no income can join KiwiSaver. There is no employer match in this case, but contributing at least NZ$1,042.86 per year captures the full NZ$521.43 Government contribution. Many self-employed members set a monthly direct debit of about NZ$87.
Source: IRD — KiwiSaver self-employed
Children can't join KiwiSaver.
Anyone under 18 can join KiwiSaver if their parent or guardian signs them up. Under-18 members do not receive the Government contribution or the employer contribution, but contributions and earnings still compound from day one. The eligibility rules change from age 18 onward.
Source: IRD — KiwiSaver for under-18s
Past performance shows which fund will do best next year.
Every KiwiSaver Product Disclosure Statement carries the regulator-mandated warning that past performance is not a reliable indicator of future returns. Returns depend on asset mix, market conditions, fees, and timing of contributions and withdrawals. Use returns as one input among several.
Source: FMA — Reading a PDS
If I move overseas, I have to close my KiwiSaver account.
You can stay in KiwiSaver while overseas. After at least one year of permanent emigration to a country other than Australia, you can withdraw most of your balance (the Government contribution is repaid to IRD). Permanent emigrants to Australia can transfer the balance into an Australian super fund.
Source: IRD — KiwiSaver and overseas
KiwiSaver counts as income for Working for Families and student loan repayments.
KiwiSaver investment returns are taxed inside the PIE at your PIR and are not counted as taxable income for Working for Families, student-loan repayment, or child-support calculations. Employer contributions are not counted as employee income for those tests either.
Source: IRD — PIE income
I should switch to cash when markets fall.
Switching from a growth or balanced fund to cash after a fall locks in the loss and means you miss the typical recovery. The FMA and Sorted both flag panic-switching as one of the most damaging member behaviours in past market events. Make switching decisions based on timeframe, not last week's headlines.
All KiwiSaver providers offer roughly the same funds at roughly the same price.
Annual fund fees in 2026 range from about 0.25% (passive index growth funds) to over 1.50% (some actively managed and balanced funds with performance fees). Asset mix, currency hedging, ESG screens, and active versus passive philosophy all vary materially. Compare on the FMA Disclose register and tools like FundCompare.
Source: FMA Disclose register
Frequently Asked Questions
Where do these myth rebuttals come from?+
Each rebuttal cites Inland Revenue (IRD), the Financial Markets Authority (FMA), or Sorted (the Retirement Commission's free guidance service). These are the three primary sources for KiwiSaver rules and member guidance in New Zealand.
Is the default-fund mandate really balanced now?+
Yes. From 1 December 2021, the six appointed default KiwiSaver providers were required to use a balanced fund as their default, replacing the prior conservative mandate. New default members are auto-allocated to a balanced fund.
Can I really withdraw KiwiSaver to buy a first home?+
Yes — after at least 3 years of KiwiSaver membership, eligible first-home buyers can withdraw their member contributions, employer contributions, Government contribution, and investment returns, leaving a minimum NZ$1,000 in the account. Read the full rules in our first-home guide.
If past returns don't predict future returns, what should I look at?+
Asset mix (matched to your timeframe), total fees, the provider's stated investment approach in the PDS/SIPO, and how the fund has behaved through one or more market cycles. Use FMA Disclose for the source data.
Keep Reading
Important Information
Disclaimer: This page provides general information only and does not constitute financial advice under the Financial Markets Conduct Act 2013. FundCompare.co.nz is not a licensed Financial Advice Provider (FAP).
We do not assess suitability, make recommendations, or provide personalised advice. The information shown is sourced from publicly available data and may not reflect current offerings. Past performance is not a reliable indicator of future returns. Investment returns can be negative, and you may receive back less than you invested.
Before making any decisions: Always verify current information directly with the relevant KiwiSaver provider and read their Product Disclosure Statement (PDS).
Need personalised advice? Consult a licensed Financial Advice Provider. Find advisers at fma.govt.nz