Active vs Passive KiwiSaver Funds: Which Wins in NZ? (2026)

Active funds like Milford and Generate charge 1.39-1.43% chasing higher returns; passive funds like Simplicity and Kernel charge 0.24-0.25% tracking the index. After fees, the gap is smaller than the marketing suggests.

The "active vs passive" choice is a major fee decision in your KiwiSaver. Active managers like Milford and Generate pick stocks and try to beat the market, charging roughly 1.39% to 1.43% a year (more in strong years for performance-fee funds). Passive index funds like Simplicity and Kernel simply track the market for as little as 0.24%. The question to ask is not "which had the best return last year?" but "after fees, which model wins over a working lifetime?"

This guide compares the real 2026 fees and after-fee returns of the funds Kiwis actually hold, shows where active has genuinely added value in New Zealand, where passive is almost impossible to beat, and how you might sensibly blend the two.

TL;DR: Active KiwiSaver funds (Milford, Generate) charge roughly 1.39-1.43% p.a.; passive funds (Simplicity, Kernel) charge 0.24-0.25% p.a. Over five years to early 2026, after fees and tax, Generate Focused Growth (1.39%) beat Simplicity Growth (0.24%) by just 0.40% p.a. despite charging six times more. Fees are the one return you control.

What is the difference between active and passive KiwiSaver funds?

A passive (or "index") fund buys the whole market and holds it. If a fund tracks the S&P 500, it owns all 500 companies in proportion, and only changes when the index changes. No analyst is deciding Spark is a buy and Air New Zealand is a sell. Because there is almost no research, trading or stock-picking, the running cost is tiny, and in New Zealand the leading passive funds charge 0.24% to 0.25% per year ⁷⁸.

An active fund pays a team of fund managers and analysts to pick investments they believe will beat the market, to time when to hold more cash, and to lean into or out of regions and sectors. That research and trading costs money, so active funds charge more, typically in the range of 1.39% to 1.43% per year once you include base and performance fees ³⁴. Because performance fees fluctuate, the all-in cost can rise further in strong years (see Milford below). The promise is that their skill more than pays for the higher fee.

Both sit inside the same KiwiSaver and PIE tax wrapper, both come in Conservative through to Growth and High Growth risk profiles, and both are regulated by the FMA. The only real differences are how investments are chosen and, crucially, what you pay.

How NZ passive providers (Simplicity and Kernel) keep fees low

New Zealand's two best-known passive providers built their entire model around being cheap.

Simplicity is a non-profit. It runs index funds, contracts out the underlying investment to low-cost global managers, and returns its surplus to charity rather than shareholders. From 1 September 2025 it cut its fee to 0.24% per year on every diversified KiwiSaver and investment fund, down from 0.25%, with no membership fee. Its Global Share and Bond funds are 0.15%, and single-sector NZ funds just 0.10% ⁷. (Note: Sorted's Smart Investor profile may still display the older 0.25% figure until it refreshes; 0.24% is the current published rate ⁶⁷.)

Kernel launched its KiwiSaver plan in 2022 and charges 0.25% per year on its core index funds and 0.45% on thematic funds such as Moonshots and Clean Energy, again with no membership fee ⁸. You build your own mix from index "bricks" rather than buying one diversified fund.

To put that in perspective, the industry-average growth/diversified fee in New Zealand sits somewhere around 1.04% to 1.29% per year ¹⁴. Leading passive funds charge roughly a fifth of that. On a $100,000 balance, 0.24% is $240 a year versus $1,390 at the top of the active range, every year, whether the market goes up or down.

How active managers (Milford and Generate) try to beat the market

Milford Asset Management runs the best-known active KiwiSaver fund in the country, Active Growth. It charges a 1.05% base fund fee plus a performance fee of 15% of returns above a 10% benchmark (subject to a high-water mark). Because the performance fee fluctuates year to year, the total fee is not fixed: Milford's own fact sheet reports total fund fees of around 1.25% in lower-performance-fee years, but accrued performance fees pushed the total materially higher in 2025 (toward ~1.43% on a historical average performance-fee basis, and as high as ~1.77% at 30 September 2025) ³. In other words, a flat "1.25%" understates the realistic all-in cost. Milford's pitch is that its team actively shifts between shares, bonds and cash, and its long-run record backs the higher fee: the fund returned 9.58% per year over five years (gross of tax, after the base fund fee), or 8.79% per year after 28% tax, to 31 December 2025 ².

Generate is the other big active name. Its Focused Growth KiwiSaver fund is Generate's highest-risk, aggressive mandate (Sorted benchmarks it against the aggressive peer average, so it is not a perfect like-for-like with Simplicity's Growth fund) and carries a 1.16% management fee plus a 0.12% membership component, totalling 1.39% in combined fees ⁴. Generate reports its own before-tax, after-fee returns of 9.03% per year over five years and 10.46% per year over ten years to 31 May 2026 ⁵, a genuinely strong long-run number that shows active management can deliver. (Generate's 9.03% is after fees but before tax to 31 May 2026, while the 6.41% in our table is after fees and 28% tax to 31 March 2026 — the gap is the tax drag and the different end date, not a contradiction.)

The performance fee on Milford's fund is worth understanding: you only pay the extra slice in years the fund beats its 10% hurdle, and the high-water mark stops you paying twice for the same gains. It aligns the manager with you, but it also means a great year is a more expensive year.

After fees, who actually wins?

Comparing returns net of cost

Gross returns are a sales tool. The only number that lands in your account is the return after fees and after tax, so that is what we compare. Sorted's Smart Investor publishes returns on exactly this basis. Here is how the funds stack up.

A few honest observations from these numbers:

• Generate edged Simplicity by a fraction — while charging six times the fee. Generate Focused Growth returned 6.41% per year net versus Simplicity Growth's 6.01% per year, a gap of just 0.40% per year. But Generate's fee (1.39%) is roughly six times Simplicity's (0.24%). The active fund won by a whisker after charging vastly more — so on this comparison the higher fee bought almost nothing extra. (Note the two are not perfect peers: Focused Growth is an aggressive mandate, while Simplicity Growth sits in the growth category.)
• Milford's figure is not directly comparable. Its 8.79% is a gross-of-tax 9.58% manually adjusted for 28% tax, reported to 31 December 2025 — not a genuine Sorted after-fee-after-tax figure to 31 March 2026 like the others. We have kept it in a separate row and flagged it because placing it in the same net column as the Sorted figures would overstate Milford's lead. Milford does have a strong genuine long-run record ², but treat this number as indicative only.
• Kernel has no comparable five-year figure because its plan launched in 2022; its shorter-period (post-2022) returns are available on Sorted ⁸, but we have left it out of the five-year comparison rather than pad the table with a non-comparable number.
• Comparisons are imperfect. The Milford figure is reported gross of tax then adjusted for 28% tax, to a December date, while the Sorted figures are net to a March date, and the funds are not identical in asset mix or risk profile. Treat the table as directional, not a stopwatch finish.

The takeaway is not "active loses". It is that a high fee guarantees a cost and only promises a return. A small minority of active managers (Milford being the standout NZ example) justify the fee; many do not, and you cannot reliably pick the winner in advance.

Where active has added value in NZ

Passive is not automatically the right answer. Active management has earned its place in a few specific situations in the New Zealand market:

• A genuine long-run track record. Milford's Active Growth and Generate's Focused Growth both show double-digit or near-double-digit long-horizon returns after fees ²⁵. A manager who has beaten the market across multiple cycles, not just one hot year, has demonstrated something real.
• Downside management in volatile periods. Active funds can hold more cash or shift defensive when a manager sees risk. A passive fund is always fully invested in its index, all the way down. For investors who panic-sell in a crash, an active manager who cushions the fall can be worth the fee in behaviour terms, by keeping you invested.
• Smaller and less-efficient markets. New Zealand and Australian shares are smaller, less-researched markets than the US, where a skilled manager has more chance of finding mispriced companies than they do trying to out-think the deeply-analysed S&P 500.

Investors who trust that an active manager is steering may be more likely to stay invested through drawdowns rather than switch out at the bottom. That retained discipline is worth real money, even though it never shows up in a fee table.

Where passive is hard to beat

For the largest slice of most portfolios, global developed-market shares, the evidence is brutal for active managers. The US market is so heavily researched that the average active fund, after its fee, lags a simple index tracker over long periods. This is why a fund like the InvestNow Foundation Series US 500 Fund, which holds the S&P 500 via a Vanguard ETF in an NZ PIE, charges just 0.03% per year ¹⁵. There is almost nothing to pay for, because nobody is trying to beat the index, and over time very few do.

Passive wins on the things you can actually control:

• Cost is certain; outperformance is not. Every dollar of fee is a guaranteed loss to your balance. At 0.24% versus 1.39%, the passive investor starts each year more than a full percent ahead before a single share moves.
• The compounding drag is enormous. Over a 30-year working life, an extra 1% in fees can quietly consume a meaningful share of your final balance, because you lose the fee and all the growth that fee would have earned.
• No manager risk. With an index fund, you cannot pick the wrong star manager who then retires, loses their touch, or has a bad decade.

For core, global, long-horizon money, passive is the default that the burden of proof sits against active to beat.

Can you blend both?

Yes. Active versus passive is an allocation decision, not an all-or-nothing one. A sensible blend might look like:

• Passive core for global shares (Simplicity, Kernel, or a low-cost index fund), where active rarely earns its fee.
• A targeted active allocation to a manager with a real record, like Milford, for NZ/Australian shares or for the downside-management comfort it provides.
• Cost-weighted, not split-down-the-middle. Blending does not mean 50/50. If 80% of your money sits in a 0.24% passive core and 20% in a ~1.39% active fund, your blended fee is around 0.47%, far closer to passive, while still giving you an active manager's hand on the wheel.

Kernel's "build your own" model and Simplicity's single diversified funds can both sit alongside an active KiwiSaver fund if you are willing to hold more than one provider. Want to see the fee drag on your own balance? Try our KiwiSaver fee calculator and Health Check to model what each fee level costs you over time. For a side-by-side on the two biggest active names, see our Generate vs Milford comparison, and for the full market, our KiwiSaver fund comparison.

Don't let fees distract from the basics

Whichever model you choose, two things matter more than the active/passive question for most Kiwis under 40: being in a high-enough risk profile for your timeframe, and capturing every dollar of free money.

Make sure you are claiming the government contribution. From 1 July 2025 it pays 25 cents per $1 you contribute, up to a maximum of $260.72 a year, which means you need to put in at least $1,042.86 of your own money between 1 July and 30 June to get the full amount ⁹¹⁰. Members earning over $180,000 a year are no longer eligible ⁹¹¹. And note the default contribution rate rose to 3.5% each for you and your employer from 1 April 2026, rising again to 4% from 1 April 2028 ¹².

It is common for members to focus on a 0.5% fee difference while contributing too little that year to claim the full $260.72 government contribution. The fee matters; the government contribution matters more.

Your active-vs-passive checklist

1. Find your real total fee. Look up your fund on Sorted's Smart Investor and note the total fee, including any performance and membership fees, not just the headline. For performance-fee funds like Milford, that total moves year to year.

2. Compare after-fee, after-tax returns over 5+ years, never one year, and check you are on the correct PIR (10.5%, 17.5% or 28%) ¹³.

3. Match risk profile to timeframe first. A 0.24% conservative fund is the wrong answer for a 30-year-old saving for retirement.

4. Decide if active is earning its keep. Has your active manager beaten a comparable index fund after fees over multiple years? If not, you are paying for a promise.

5. Consider a passive core plus a targeted active slice rather than all-or-nothing.

6. Claim the full government contribution ($1,042.86 in by 30 June) ¹⁰.

7. Get a second opinion. A KiwiSaver review checks your fund, fee, PIR and contribution rate in one sitting.

Frequently asked questions

Is active or passive KiwiSaver better in NZ? Neither wins automatically. Over five years to early 2026, Milford's active growth fund outperformed after fees (on a different date and basis), and active Generate Focused Growth (1.39%) edged passive Simplicity (0.24%) by just 0.40% per year net — 6.41% versus 6.01% — despite charging six times more ²⁴⁶. Passive is hard to beat in efficient global share markets; a small number of active managers add value. Lower fees are the one factor entirely within your control.

How much cheaper are passive KiwiSaver funds? A lot. Simplicity charges 0.24% per year and Kernel's core index funds 0.25%, versus around 1.39-1.43% for Milford Active Growth (a performance-fee fund) and 1.39% for Generate Focused Growth ³⁴⁷⁸. On a $100,000 balance that is roughly $240 a year versus $1,390 or more, every year.

Does paying a higher fee mean a better return? No. A higher fee is a guaranteed cost; outperformance is only a possibility. Generate Focused Growth beat Simplicity Growth over five years by just 0.40% per year while charging roughly six times the fee, so the fee bought almost nothing extra ⁴⁶. Milford has historically justified its fee with strong after-fee returns ², but many active funds do not beat a cheap index fund once costs are deducted. You cannot reliably identify the future winners in advance.

What is a performance fee, and does my fund charge one? A performance fee is an extra charge when a fund beats a set benchmark. Milford Active Growth charges 15% of returns above a 10% hurdle, subject to a high-water mark, on top of its 1.05% base fee. Because that slice fluctuates, its total fee moves year to year (around 1.25% in low years, materially higher when performance fees accrue) ³. Simplicity and Kernel charge no performance fee at all.

Can I have both active and passive KiwiSaver funds? Yes. You can hold a low-cost passive core and a targeted active allocation, even across two providers. A common blend is a passive global core with an active NZ/Australian or growth slice, which keeps your overall fee close to passive levels while retaining an active manager's hand on the wheel.

Which PIR should I use to compare returns fairly? Use your correct prescribed investor rate, which is set by both a taxable-income test and a total-income test at each tier: 10.5% if your taxable income (excluding PIE income) was $15,600 or less and your total income (including PIE income) was $53,500 or less; 17.5% if taxable income was $53,500 or less and total income was $78,100 or less; otherwise 28% ¹³. Sorted's after-tax figures assume 28%, so adjust if your PIR is lower.

General information, not personalised financial advice. Seek advice tailored to your situation before acting. Craig Smith Business Services Ltd (FSP712931), trading as Smiths Financial, holds a Class 2 licence issued by the Financial Markets Authority and is a member of the Financial Dispute Resolution Service (FDRS). Written by Henry Smith, Financial Adviser; reviewed by Craig Smith, Principal Adviser. Last reviewed 16 June 2026.