Understanding KiwiSaver Default Funds: What They Are & How They Work
If you've been auto-enrolled in KiwiSaver and haven't chosen a provider, you're likely in a default fund. Learn what that means for your retirement planning, how default investment funds operate, and why actively selecting a fund could make a significant difference to your savings.
What Exactly Are KiwiSaver Default Funds?
KiwiSaver default funds are investment funds managed by government-appointed providers, designed to catch members who are auto-enrolled but haven't actively selected a fund or provider. When you start a new job in New Zealand, your employer is required to enrol you in KiwiSaver unless you opt out. If you don't choose a provider within a set timeframe, the Inland Revenue Department (IRD) allocates you to one of six default providers.
The concept behind default funds is straightforward: they serve as a safety net so that every auto-enrolled member's contributions are invested somewhere, even if the member hasn't made an active decision. These investment funds are required to meet specific criteria set by the government, including low fees and a balanced investment approach.
Default funds are not meant to be a permanent home for your savings. They are a starting point — a temporary allocation until you take the time to assess your own circumstances and choose KiwiSaver default funds that align with your personal goals, risk profile, and timeline for retirement planning.
The Six Default KiwiSaver Providers
BNZ
BNZ KiwiSaver Scheme — managed by one of New Zealand's major banks.
BT Funds Management (Westpac)
Westpac's KiwiSaver scheme, operated through BT Funds Management.
Simplicity
A not-for-profit provider known for low fees and straightforward fund options.
Smart (Smartshares)
An index-based provider offering passive investment funds.
Fisher Funds
Formerly Kiwi Wealth, one of New Zealand's largest fund managers.
SuperLife
A Smartshares subsidiary offering a range of diversified investment funds.
How KiwiSaver Default Funds Work: The Passive Approach
Understanding the auto-enrolment process and how default funds invest your money is the first step toward taking control of your KiwiSaver and your broader retirement planning strategy.
Auto-Enrolment Process
AutomaticWhen you start a new job, your employer automatically enrols you in KiwiSaver (unless you're already a member or opt out within 2–8 weeks). Your contributions begin at the default rate of 3% of your gross salary, and your employer contributions of at least 3% are added on top.
If you don't select a KiwiSaver provider within a set timeframe, the IRD assigns you to one of the six default providers at random. Your contributions then flow into that provider's default investment fund — typically a balanced or conservative option.
This passive approach means your money is being invested, but it may not be invested in the way that best suits your long-term goals. The allocation to default funds is designed for broad suitability, not individual optimisation.
Investment Approach
BalancedSince December 2021, default funds have been required to follow a balanced investment strategy — a shift from the previous conservative mandate. This change was driven by research showing that overly conservative investment funds were costing younger members significant long-term returns.
A balanced fund typically holds a mix of growth assets (shares and property) and income assets (bonds and cash), roughly in a 40–60% growth allocation. This provides moderate growth potential while managing downside risk.
For context, New Zealand Superannuation provides a baseline retirement income from age 65, but KiwiSaver is intended to supplement this. The returns generated by your default fund — or any fund you choose — directly affect how much additional income you'll have alongside New Zealand Superannuation when you retire.
Default fund members are a significant group
Hundreds of thousands of KiwiSaver members remain in default funds without having made an active choice. Many are unaware they can switch at any time, free of charge. If you're one of them, understanding your options is the single most impactful step you can take for your retirement planning.
cost to switch funds
Evaluating Your Default Fund: Is It Right for Your Retirement Planning?
Just because you've been placed in a default fund doesn't mean it's wrong for you — but it also doesn't mean it's right. Effective retirement planning requires you to assess whether your current investment fund matches your personal circumstances, goals, and risk appetite.
Consider your age and time horizon. If you're in your twenties or thirties with decades until retirement, a balanced default fund may be too conservative. Historical data shows that growth and aggressive investment funds tend to outperform conservative and balanced options over periods of 20 years or more, despite greater short-term volatility. Our guide to understanding fund risk explains these trade-offs in detail.
Your personal financial goals also matter. If you're planning to use KiwiSaver for a first home purchase within the next few years, a more conservative approach might be appropriate. But if retirement is your primary objective, aligning your fund to your actual risk tolerance is crucial.
Get personalised advice
If you're unsure whether your default fund is appropriate, licensed financial advisers can assess your situation and recommend a fund suited to your needs. See our guide to financial advisers for more information.
Questions to Ask Yourself
How long until I'll access these funds?
If you have 20+ years, a growth fund may serve you better than a balanced default.
Can I handle short-term market drops?
If you would panic during a downturn, a balanced fund might suit you. If you can ride it out, higher-growth options may deliver better returns.
Am I paying reasonable fees?
Compare your default fund's fees with alternatives. Even small differences compound significantly over decades. See our KiwiSaver fees guide.
How has my default fund performed?
Review your fund's returns against benchmarks and similar funds. Our performance guide explains what to look for.
Do I care about ethical or ESG investing?
Some default funds have exclusion policies, but dedicated ethical funds may offer stronger alignment with your values.
Comparing KiwiSaver Default Funds vs. Actively Managed Funds
Understanding the differences between default funds and actively chosen investment funds helps you make an informed decision about where your KiwiSaver money should be working.
| Default Funds | Actively Chosen Funds | |
|---|---|---|
| Selection | Assigned by IRD if no choice is made | Chosen by the member based on personal research or advice |
| Risk Profile | Balanced (moderate risk, ~40–60% growth assets) | Range from conservative to aggressive, matched to member's goals |
| Fees | Government requires reasonable fees; generally competitive | Varies widely — from very low (index funds) to higher (actively managed) |
| Personalisation | One-size-fits-all approach | Tailored to age, risk tolerance, goals, and values |
| Performance | Moderate default fund performance; may lag growth funds long-term | Depends on fund choice; growth funds have historically outperformed over long periods |
| Providers | Limited to 6 government-appointed default providers | 30+ providers and 200+ funds to choose from |
Default funds aren't bad — they're just generic
The six default providers are reputable institutions with competitive fees. The issue is not quality, but fit. A 25-year-old and a 60-year-old have vastly different needs, yet both would be placed in the same type of balanced investment fund. Licensed financial advisers can help you determine which fund type and provider best match your specific situation. Our guide to choosing a KiwiSaver fund is a good starting point for your research.
Maximising Your KiwiSaver: Beyond the Default Fund
Whether you stay with your default provider or switch to a new one, there are several practical steps you can take to maximise the value of your KiwiSaver. The most important is simply making an active, informed choice about where your money is invested.
Start by ensuring you're receiving the full Member Tax Credit. The government contributes 50 cents for every $1 you put in, up to $521.43 per year. To claim the maximum, you need to contribute at least $1,042.86 annually — that's roughly $20 per week. If you're employed, your employer contributions of at least 3% are on top of this, adding further to your balance.
If you're a first home buyer, remember that after three years of KiwiSaver membership you can withdraw your savings towards a house deposit. This makes the fund choice even more important: if you plan to withdraw within five years, your risk tolerance may differ significantly from someone investing for 30 years of retirement.
Choose the right fund type
Explore our guide to KiwiSaver investment funds to understand the difference between conservative, balanced, growth, and aggressive fund types.
Compare providers and fees
Use our fund comparison tool to see how different funds stack up on fees, returns, and risk — including your current default fund.
Switch if it makes sense
Switching is free and easy. Our guide to switching KiwiSaver providers walks you through the entire process step by step.
The Long-Term Impact of Fund Choice
Consider two members who both contribute $50 per week over 30 years. One remains in a default balanced fund averaging 5% annual returns, the other actively chooses a growth fund averaging 7%.
These figures are illustrative only. Past performance does not guarantee future returns. Growth funds carry higher short-term risk. Seek advice from a licensed financial adviser for personalised guidance.
Use our preference matcher
Not sure where to start? Our preference matcher lets you weight what matters most to you — returns, fees, brand reputation, and ESG values — and ranks funds accordingly.
KiwiSaver Default Fund FAQs
Answers to the most common questions about KiwiSaver default funds, switching providers, and making an active choice.
What is a KiwiSaver default fund?
A KiwiSaver default fund is a balanced investment fund managed by one of six government-appointed default providers. If you are auto-enrolled in KiwiSaver through your employer and do not actively choose a provider or fund, the Inland Revenue Department (IRD) assigns you to one of these default funds.
Who are the six KiwiSaver default providers?
As of December 2021, the six KiwiSaver default providers are BNZ, BT Funds Management (Westpac), Simplicity, Smart (by Smartshares), Fisher Funds (formerly Kiwi Wealth), and SuperLife (a Smartshares subsidiary). These were appointed by the New Zealand government following a review by the Ministry of Business, Innovation and Employment.
Should I stay in a KiwiSaver default fund?
Not necessarily. Default funds are designed as a temporary holding option and may not match your investment goals, risk tolerance, or time horizon. The FMA recommends all members actively choose a fund and provider. Younger members with decades until retirement may benefit from a growth or aggressive fund, while default funds tend to be balanced and may deliver lower long-term returns.
How do I switch from a KiwiSaver default fund?
You can switch from a default fund at any time, free of charge. Contact your current provider to change fund types within the same scheme, or choose a new provider entirely and they will handle the transfer. The process typically takes 10–15 working days. You can compare funds and providers using our tools to find the best option for your circumstances.
Ready to Move Beyond the Default?
Compare KiwiSaver funds, find the right provider for your goals, and take control of your retirement savings today.