The regulator has shared data indicating over 12,000 KiwiSaver members aged 26-35 years old are sitting in lower risk or conservative funds after switching from higher-risk growth funds during Covid-19 market volatility.

Data supplied to the FMA by 11 KiwiSaver providers shows around 12,700 younger KiwiSaver members switched from growth to conservative funds between February and April last year.

Most of them are still sitting in conservative funds, which may not be aligned with their long-term savings goals.

FMA manager of investor capability Gillian Boyes says, is calling for young New Zealanders to check if they’re in the fund that suits their needs.

“Generally speaking, you should be in a high growth fund the younger you are and the further you are from retirement.

“Growth funds provide the greatest opportunity to maximise returns and although the balance might jump around, young people have plenty of time until retirement age to recover any losses.

“The exception is if you are planning to make a first-home withdrawal within the next one to three years and may want to choose a conservative fund so you have more certainty around your balance.”

Boyes said the number of young people who are in a fund that does not match their needs is likely larger than the data suggests, as FMA data represents around three-quarters of the KiwiSaver market.

The FMA will soon release the full dataset in a report focused on KiwiSaver fund switching during the pandemic.

Head of sales and marketing at Mint Asset Management, David Boyle says that the data does not surprise him, but the demographic age range does raise an eyebrow or two.

“In that period last year when Covid hit we saw a number of New Zealanders make this change. I think it was around $450 million dollars that moved from growth to conservative.

“I am a bit surprised by the numbers of younger people being involved.”

According to Boyle this is an issue that can only be solved by all KiwiSaver providers working together.

“Every KiwiSaver provider should be looking at how they communicate with their members.

“This data … shows there is actually quite a large number of young people in conservative funds where they [may think they] don’t need to be worrying about [fund choice] too much because retirement is a long way away.”

Boyle says that in talking to these members it is crucial that all providers are singing from the same songsheet in getting the youth engaged in their KiwiSavers.

“This whole thing highlights that this conversation and the messaging around it needs to be similar across all providers.

“The power of all providers saying the same thing on this is crucial if this message is going to get out to the masses.”