A KiwiSaver conservative fund prioritises capital preservation over growth. It’s designed for members who are close to retirement, have a short time horizon, or simply can’t afford a significant dip in their balance. But for most KiwiSaver members, it may not be the right choice.
What Is a Conservative Fund?
A conservative KiwiSaver fund holds the majority of its assets in income assets — bonds, cash, and fixed interest — with a smaller allocation to growth assets like shares and property.
Typical conservative fund asset allocation:
| Asset class | Approximate allocation |
|---|---|
| Cash and cash equivalents | 15–25% |
| NZ and international bonds (fixed interest) | 45–60% |
| NZ shares | 5–10% |
| International shares | 10–20% |
| Property/infrastructure | 0–5% |
The exact allocation varies by provider. Some use the term “conservative” loosely — always check the fund’s actual asset allocation rather than relying on the name alone.
Expected Returns
Because conservative funds hold mostly bonds and cash, their return potential is lower than balanced or growth funds — but so is their volatility.
Approximate long-run returns (before fees and tax):
| Fund type | Historical long-run average (approx.) |
|---|---|
| Conservative | 3–5% p.a. |
| Balanced | 5–7% p.a. |
| Growth | 7–9% p.a. |
| Aggressive | 8–10%+ p.a. |
Past returns do not guarantee future performance.
The trade-off: in a bad year, a conservative fund might fall 5–8%, while a growth fund might fall 15–25%. But over a decade, the growth fund is almost certain to outperform significantly.
Who Should Be in a Conservative Fund?
Conservative funds are appropriate for:
- Members within 3–5 years of withdrawal — whether for retirement (65+), or first home purchase
- Retirees drawing down their balance — capital preservation becomes more important once you’re making regular withdrawals
- Members with a very low risk tolerance — if market volatility causes you significant distress and you would panic-sell (switch funds) during a downturn, a conservative fund may prevent worse decisions
- Shorter time horizons — members who joined KiwiSaver late (50s or 60s) with little time for a market recovery
Who Should NOT Be in a Conservative Fund?
- Members under 50 with 15+ years until retirement — the long time horizon means short-term volatility is irrelevant; the cost of lower returns compounds significantly
- Members who switched to conservative during the 2020 COVID crash — switching after a fall locks in losses and misses the recovery
- Members who haven’t thought about their fund choice and defaulted — many “default” funds in earlier years were conservative; check what you’re actually in
Conservative Fund Fees in NZ — Provider Comparison
| Provider | Conservative fund | Approx. annual fee |
|---|---|---|
| Simplicity | Conservative | 0.31% + $30/yr |
| InvestNow Foundation Series | Conservative | ~0.35% |
| BNZ | Conservative | ~0.40% |
| ANZ | Conservative | ~0.55% |
| Westpac | Conservative | ~0.55% |
| ASB | Conservative | ~0.50% |
| Milford | Conservative | ~0.85% |
Fees change; verify with provider before switching.
Fees matter more in a conservative fund than a growth fund — because the returns are lower, a high fee eats a larger proportion of your gain. A 0.8% fee on a fund returning 4% is effectively a 20% drag on your returns.
Conservative vs Default Fund
When KiwiSaver launched in 2007, many auto-enrolled members were placed in “default” funds, which were historically conservative-balanced in nature. In 2021, the government changed the default fund rules — new default funds must now be balanced, not conservative.
If you joined KiwiSaver before 2021 and haven’t chosen a fund, you may still be in an older conservative default fund. Checking your fund type takes 2 minutes via your provider’s app or myIR.
Switching Out of a Conservative Fund
If you’re in a conservative fund and it’s not right for your situation, switching is straightforward:
- Log in to your KiwiSaver provider’s app or website
- Navigate to fund selection / investment options
- Select the fund type that suits you (balanced, growth, etc.)
- Confirm — most switches take 2–5 business days
There is no cost to switch fund types within the same provider, and no tax event is triggered. You can also switch provider at the same time if you want to move to a lower-fee option.
See the full guide: how to change your KiwiSaver fund type.
The Real Risk of Being Too Conservative
The risk most people think about with KiwiSaver is market risk — the risk that their balance falls. But there’s a less visible risk: inflation risk — the risk that your balance doesn’t grow enough to maintain purchasing power.
At 4% return and 2.5% inflation, a conservative fund’s real return is only ~1.5%. Over 30 years, this is far less wealth-building than a growth fund’s potential real return of 4–6%.
For a 30-year-old in a conservative fund, the long-run cost of this “safety” can easily exceed $150,000–$200,000 in foregone retirement savings.
Summary
| Feature | Conservative fund |
|---|---|
| Risk level | Low |
| Typical return (long-run) | 3–5% p.a. |
| Asset mix | Mostly bonds and cash |
| Best suited to | Near-retirees, low risk tolerance |
| Poor fit for | Under 50s, long time horizon |
| Typical NZ fee range | 0.31%–0.85% |