By Neil Johns, Senior Associate | Financial Adviser, Mercer

KiwiSaver is one of the most important long-term savings tools available to New Zealanders today, but it’s also something that lots of people misunderstand.

As a financial adviser, I regularly speak to KiwiSaver members who are unsure if they’re contributing enough, in the right fund, or whether a drop in their balance means something has gone wrong. In many cases, those concerns are driven by common myths rather than the full picture.

Here are some of the KiwiSaver misconceptions I see most often:

1. “My KiwiSaver balance has dropped, so KiwiSaver isn’t working”

This is one of the most emotional reactions people have - and understandably so.

When markets are volatile and balances fall, it can feel like something is wrong.  KiwiSaver funds are invested, and investments rise and fall over time. This movement is part of the process and is expected, especially in funds with exposure to growth assets like shares.

From my perspective, the key question is not whether your balance has moved in the short term, but whether your fund choice matches your goals, investment timeframe, and comfort with risk.

If you’re investing for a goal that is still many years away, short-term fluctuations may be uncomfortable, but they are not unusual. If you intend to withdraw most, (or all) of your KiwiSaver in the near future, I recommend you review your fund choice as holding a large proportion of growth assets may not be suitable for you.

My view: A temporary drop in balance does not necessarily mean your KiwiSaver strategy is off track. Context and time matters.

2. “Conservative funds are the safest option”

This is a belief I encourage everyone to look at more closely.

A conservative fund may feel safer because it tends to have lower short-term volatility. If someone has a long timeframe before they need their KiwiSaver money, being too conservative can introduce a different type of risk - the risk of not achieving enough growth over the long term.

That doesn’t mean conservative funds are inappropriate. For some, they may be entirely suitable. But fund choice should not be based on labels alone or on what feels safest in the moment. It should be based on how the fund aligns with your objectives and time horizon.

My view: “Safe” means different things in different contexts. The right question is whether your fund is appropriate for your specific needs.

3. “KiwiSaver is only about retirement”

Retirement is the main purpose of KiwiSaver, but for some it may also play a role in helping them into a first home, where eligibility criteria are met.

That’s one reason I often encourage younger Kiwis not to dismiss KiwiSaver too quickly. Even if retirement feels a long way off, KiwiSaver may still be relevant much earlier in life than they expect.

It can also help build the habit of regular long-term investing, which is valuable in its own right. With the recent changes to the eligibility for 16- and 17-year old’s for employer and Government contributions, it can have an even bigger impact on their ability to get money out for their first home.

My view: KiwiSaver is not just something to think about at the end of your career. For many people, it can support important goals much earlier.

4. “I’m too young to worry about KiwiSaver”

In advice conversations, I often remind younger clients that time is one of the most powerful advantages an investor can have.

Starting earlier gives your savings more time to potentially benefit from compounding,  long-term investment growth. Even relatively modest contributions can build meaningfully over time if they are made consistently and left invested appropriately.

By contrast, delaying decisions about KiwiSaver can make it harder to build momentum later on.

My view: The earlier you begin engaging seriously with KiwiSaver, the more options you may give yourself in the future. Even contributing just $20 a week could make a big difference to your financial goals in the long-term.

5. “I should switch funds as soon as markets get shaky”

This is another myth that can lead to poor outcomes.

When markets are under pressure, it’s natural to want certainty. Switching funds in reaction to short-term volatility, can sometimes lock in losses or leave you missing out on any recovery that follows.

That doesn’t mean fund changes are never appropriate. There are times when they absolutely are. But those decisions should ideally be made for strategic reasons - such as a change in goals, timeframe, or risk tolerance - rather than out of panic.

My view: Good KiwiSaver decisions are usually grounded in a plan, not in short-term emotion.

6. “KiwiSaver only really helps high earners”

While higher earners may be able to contribute more, KiwiSaver can still be valuable across a wide range of income levels.

What often matters just as much is consistency, time in the market, eligibility for employer and government contributions, and whether someone is in a fund that suits their circumstances and risk appetite.

I think this is an important point because KiwiSaver is sometimes underestimated by those who feel they cannot contribute “enough”. In reality, starting somewhere and contributing regularly can still make a difference over time.

My view: KiwiSaver is not just for high earners. It can be a useful long-term investment tool for many New Zealanders.

7. “KiwiSaver is only for those with full-time jobs”

This is a common misconception. KiwiSaver can still be relevant even if you’re not in traditional full-time employment.

I regularly come across people who assume KiwiSaver only works if you have a permanent salary and employer deductions. In reality, self-employed, contractors, part-time workers, and casual employees may also be able to benefit from KiwiSaver. While contributions may work differently depending on your situation, that doesn’t mean the opportunity isn’t there.

Depending on eligibility and contribution levels, some outside full-time employment may also qualify for the annual government contribution.

My view: KiwiSaver is broader and more flexible than many realise, and it can still be worth considering even if your work situation is less conventional.

Final thoughts

Many of the KiwiSaver questions I hear are driven by understandable concerns, but also by myths that can cloud good decision-making.

In my experience, the most effective approach is to step back from the noise, focus on your goals, understand your timeframe, and make decisions that suit your personal circumstances rather than relying on emotions.

KiwiSaver is not one-size-fits-all. But with the right understanding, it can be an important part of someone’s long-term financial wellbeing.

If you would like to speak to a Mercer financial adviser about the Mercer KiwiSaver scheme, please fill out this form for a no obligation call back from one of our financial advisers.

Additional resources

• Fund Selector – to work out your risk appetite.
• Financial Advice Provider – Disclosure Statement
• Estimate your retirement savings and income – use our Retirement Income Simulator to see what your retirement balance and income could look like.

<sup>This article has been prepared by Mercer (N.Z.) Limited. The information contained in this article is intended for general guidance only. It does not take into account your particular financial situation or goals. Before making any investment decision, you should refer to the Product Disclosure Statement or consult an appropriately qualified financial adviser.

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