Why Doing Nothing Is Often the Smartest KiwiSaver Move (NZ)

Action bias pushes us to tinker with KiwiSaver, but doing nothing usually wins. Here is the line between healthy patience and harmful neglect, and the settings to get right once and then leave alone.

This article is general information only and is not personalised financial advice. It does not take into account your particular financial situation, goals or needs. Before acting, consider whether it's right for you and seek advice tailored to your circumstances.

KiwiSaver rewards a quality that does not feel like much: patience. The instinct to check the balance after a bad market day, to switch funds when a headline rattles you, or to "do something" when everyone else seems to be acting, is natural. It is also, more often than not, the instinct that costs you money. For most members, the smartest move on any given day is to leave a well-set account alone.

That is not the same as ignoring it forever. There is a real difference between healthy patience and harmful neglect, and this article draws the line between the two.

TL;DR: With KiwiSaver, doing nothing usually beats tinkering. Sorted's guidance is that frequently switching funds or trying to time the market tends to lock in losses and reduce long-term returns. ⁵ The skill is getting a few settings right once, your fund type, PIR and contribution level, then leaving the account to compound while you ignore the daily noise.

Why do we feel we should always be doing something with our KiwiSaver?

KiwiSaver sits in a strange spot. It is one of the larger sums of money most New Zealanders will ever build, yet for years there is nothing useful to do with it. Money that matters but rarely needs action is uncomfortable to hold. The discomfort makes us look for a job to do.

It does not help that the rest of our financial life rewards effort. Shopping around saves on power and insurance. Paying down debt faster clearly helps. So it feels logical that effort should help here too. With a long-term, diversified investment, that logic often runs backwards: the effort of switching, timing and reacting tends to subtract rather than add.

What is action bias and how does it show up in investing?

Action bias is the tendency to favour doing something over doing nothing, even when doing nothing is the better option. It shows up anywhere we feel responsible for an outcome but cannot fully control it. We would rather act and be wrong than sit still and be wrong, because action at least feels like control.

In KiwiSaver, action bias tends to appear as:

• Checking the balance constantly, then feeling pressure to respond to what you see.
• Switching funds after a fall, moving to cash or conservative once the loss has already happened.
• Chasing last year's top performer, jumping into whichever fund led a recent league table.
• Reacting to the news cycle, adjusting a 30-year investment because of this month's headlines.

Each of these feels responsible in the moment. Each tends to work against a long-term saver. Sorted's guidance is that frequently switching funds or trying to time the market tends to lock in losses and reduce long-term returns, compared with staying invested in a fund that suits your timeframe and risk comfort. ⁵ The behaviour we read as prudent is often the behaviour doing the damage.

If you want to go deeper on the patterns themselves, our guide to behavioural investing mistakes in KiwiSaver walks through each one.

When is doing nothing actually the right move?

Doing nothing is the right move far more often than people expect, provided the account is set up sensibly to begin with. A few situations where patience usually beats action:

• Markets have just fallen. Selling after a drop turns a paper loss into a real one and risks missing the recovery. A balance that fell is not a loss until you crystallise it by switching.
• A headline is loud. Geopolitics, an election, a scary economic forecast: none of these change the right fund for someone three decades from retirement.
• A fund topped a league table last year. Past performance is not a reliable indicator of future performance, and last year's leader is often this year's laggard.
• Your settings are already right. If your fund type fits your timeframe, your PIR is correct and you are contributing enough, there is genuinely nothing to do but keep contributing.

The value of inaction is hard to feel because nothing visible happens. But staying invested through a fall, rather than reacting to the worst day, is one of the main things that protects long-term returns. The reward for patience is real; it just arrives quietly, over years.

Where is the line between healthy patience and harmful neglect?

This is the crux. "Doing nothing" is a strength when it means resisting the urge to react. It is a weakness when it means never checking the few things that quietly cost you. The same phrase describes both the best and worst KiwiSaver behaviour, so the distinction matters.

The figure below sorts the two apart.

Healthy inaction vs harmful neglect

Source: Smiths Financial. General educational framing, not personalised advice.

The pattern is clear. Patience pays when the thing you are resisting is a reaction to noise. Neglect costs when the thing you are ignoring is a setting within your control. The goal is to get the controllable settings right once, then earn the right to ignore the noise for good.

Which KiwiSaver settings are worth getting right once, then leaving?

These are the "set once" decisions. Spend real attention on them, get them right, and they need only an occasional check after that.

Your fund type. This is the biggest lever you control. A fund should match your timeframe and your comfort with ups and downs, not your mood this week. Many people with a long time horizon and tolerance for short-term swings consider a growth-tilted fund, accepting more volatility for the prospect of higher long-run returns; people closer to spending the money often hold something more conservative. Returns are not guaranteed and can go down as well as up. Sorted's KiwiSaver Fund Finder lets you check your fund type and fees in minutes. ⁸ Named NZ providers across the risk spectrum include Simplicity, Booster, Milford, Generate, Fisher Funds and Kernel; compare like-for-like on the relevant Product Disclosure Statement before deciding.

Your PIR (Prescribed Investor Rate, the tax rate on your KiwiSaver earnings). KiwiSaver is taxed as a PIE, and the PIR options are 10.5%, 17.5% or 28%. ⁴ Set it too high and you overpay tax on your returns; too low and you face a bill at year end. It is a classic set-once setting that many people never revisit even when their income changes.

Your contribution level. To receive the full government contribution you needed to contribute at least $1,042.86 of your own money during the KiwiSaver year (1 July to 30 June), roughly $20 a week. ² As at 16 January 2025 the maximum government contribution was $521.43 (50c per $1 you put in). ¹ That rate was halved to 25c per $1 (maximum $260.72) from 1 July 2025, so check the current figure at ird.govt.nz before relying on it. The minimum default contribution rate was 3% each for employee and employer at that date. ³

For the full list of settings people most often get wrong, see our guide to common KiwiSaver mistakes.

What news and noise should you deliberately ignore?

A useful skill is deciding in advance what you will not react to. The list below is noise for a long-term KiwiSaver member, not signal:

• Daily and weekly balance movements. Within a few years of withdrawing they matter; until then they are noise.
• Market commentary and forecasts. Predictions about where markets head next are not a basis for switching a multi-decade investment.
• League tables of last year's best fund. Useful for checking fees and fund type, dangerous as a switching trigger.
• Friends and forums reacting to a dip. Other people's nerves are not your strategy.

Plenty of automatic things also run in the background without you lifting a finger. Your employer contributions, the ACC earners' levy deducted from wages (for example, $1.60 per $100 of liable earnings in 2024/25, up to maximum earnings of $142,283 ⁹), and PAYE all tick along on their own. They are reminders that a lot of your financial machinery is designed to work without daily input, and your KiwiSaver fund largely is too.

How an annual review replaces constant tinkering

The honest reason people tinker is that doing nothing feels like neglect. An annual review removes that excuse. By committing to one proper check a year, you give the urge to act a scheduled, productive outlet, which makes it far easier to ignore the noise in between.

A yearly review is also where the "harmful neglect" column gets caught: a wrong PIR, a default fund that no longer fits, fees you have never compared, a contribution shortfall before the 30 June cut-off, or out-of-date beneficiary details. None of these need daily attention; all of them benefit from one annual look. Our explainer on what happens in a KiwiSaver review walks through the checklist.

It is worth being clear about what a review is not: it is not a prompt to switch funds. The point of switching is rare and deliberate. If you are weighing it up, when to switch KiwiSaver funds covers the handful of genuine reasons, separate from the urge to react to a falling market.

The set-and-forget checklist that earns the right to do nothing

Run this once. If everything checks out, you have genuinely earned the right to leave the account alone until your next annual review.

1. Fund type: Does my fund match my timeframe and my comfort with market ups and downs? ⁸

2. PIR: Is my prescribed investor rate correct against the income thresholds, so I am not over- or under-taxed? ⁴

3. Contributions: Am I contributing enough to receive the full government contribution before 30 June? ¹²

4. Fees: Have I checked my annual fund charge against comparable funds, even once? ⁸

5. Details: Are my contact and beneficiary details current?

6. Review: Is a 30-minute review booked for roughly the same time next year?

Tick all six and the smartest thing you can do is, genuinely, nothing, until next year.

Frequently asked questions

Is "set and forget" good or bad for KiwiSaver? Both, depending on what you forget. Forgetting the daily noise and not panic-switching is healthy patience. Forgetting your PIR, fund type, fees and contribution level for years is harmful neglect. The aim is to get the controllable settings right, then leave the account to compound. ⁴⁵

Should I switch my KiwiSaver fund when markets fall? Switching purely because markets just fell is usually the mistake; it can turn a paper loss into a real one and risk missing the recovery. Sorted's guidance is that frequently switching or trying to time the market tends to reduce long-term returns. A genuine change in your timeframe or goals is a different matter, and worth advice. ⁵

How often should I actually look at my KiwiSaver? For most people, an annual review is enough to catch a wrong PIR, a fund that no longer fits, a fee worth questioning, or a contribution shortfall, without the harm of daily tinkering. Checking the balance more often rarely changes the right long-term decision.

What are the "set once" KiwiSaver settings? Your fund type (matched to your timeframe and risk comfort), your PIR of 10.5%, 17.5% or 28%, and your contribution level. Getting these right once matters more than reacting to market news. ⁴⁸

How much do I need to contribute to get the full government contribution? At least $1,042.86 of your own money during the KiwiSaver year (1 July to 30 June), roughly $20 a week. As at 16 January 2025 the maximum government contribution was $521.43; this was reduced from 1 July 2025, so check the current figure at ird.govt.nz. ¹²

Smiths Financial is a trading name of Craig Smith Business Services Ltd (FSP712931), which holds a Class 2 financial advice provider licence issued by the Financial Markets Authority to provide financial advice on personal risk insurance, health insurance, general insurance, KiwiSaver and managed funds. Our advisers, Henry Smith (Financial Adviser) and Craig Smith (Principal Adviser), are bound by the Code of Professional Conduct for Financial Advice Services and the duty to give priority to clients' interests. Craig Smith Business Services Ltd is a member of the Financial Dispute Resolution Service (FDRS), a free and independent dispute resolution scheme. Our publicly available disclosure information is available free of charge at smithsfinancial.co.nz/disclosure and on the FMA Financial Service Providers Register at fsp-register.companiesoffice.govt.nz. To get advice tailored to your circumstances, book a conversation.

KiwiSaver is a long-term savings scheme. Government contributions, contribution rates, withdrawal rules and tax (PIR) settings are set by the Government and can change. Figures are correct as at 16 January 2025. Check current rules at ird.govt.nz, kiwisaver.govt.nz and sorted.org.nz, and the relevant scheme's Product Disclosure Statement. Returns are not guaranteed. The value of investments can go down as well as up and you may get back less than you invested. Past performance is not a reliable indicator of future performance.

Written by Henry Smith, Financial Adviser at Smiths Financial (FSP712931); reviewed by Craig Smith, Principal Adviser. Last reviewed 16 January 2025.