FMA warns of volatility and investor awareness
The Financial Markets Authority (FMA) has reported a significant shift in the risk profile of KiwiSaver funds between 2021 and 2024.
According to the FMA, “There has been a marked increase in the proportion of KiwiSaver funds allocated to higher-risk assets, such as shares and property, and a corresponding decrease in lower-risk assets, such as cash and fixed interest.”
KiwiSaver hardship withdrawals hit record highs in 2024, with over $300 million withdrawn, reflecting ongoing financial stress for many New Zealanders despite easing inflation.
More volatility ahead for KiwiSaver members
The regulator noted that this shift means “KiwiSaver members are now more exposed to market volatility than they have been in the past.” The FMA added, “This means that KiwiSaver balances are likely to experience larger ups and downs in response to market movements.”
FMA urges providers to support investor understanding
The FMA is calling on KiwiSaver providers to ensure their members are informed about the risks.
“Providers need to ensure their members understand the risks they are taking on and are comfortable with the potential for greater volatility in their balances,” the report said.
Younger members most exposed to high-risk funds
The FMA’s analysis found that “younger members are more likely to be in higher-risk funds, which is generally appropriate given their longer investment horizons.”
However, it cautioned, “It is important that members are aware of the potential for short-term losses, especially as they approach retirement or plan to use their savings for a first home.”
Ongoing monitoring and guidance
“We will continue to monitor the risk profile of KiwiSaver funds and work with providers to ensure members are well supported in making informed decisions about their retirement savings,” the FMA said.
For more details, see the full FMA report: Increased risk profile of KiwiSaver funds 2021–2024
