A–Z · plain English
KiwiSaver glossary.
Every term you'll come across reading about KiwiSaver, explained in plain English by Smiths Insurance and KiwiSaver. 39 entries, no jargon.
A
Active management
A fund manager picks the investments themselves, trying to beat the market average.
- Active funds employ a team that researches and picks individual shares, bonds and other assets, aiming to beat a benchmark index. They typically charge higher fees (1–1.6% in NZ) to pay for the team. Whether they actually beat the market over the long term is contested. some do, most don't.
Aggressive fund
A KiwiSaver fund that holds 90%+ growth assets. biggest swings, biggest long-term upside.
- Aggressive funds put almost everything into shares (NZ, Australian, global). They're suited to long-term horizons (10+ years) where you can ride out market drops. NZ examples include Booster's Socially Responsible High Growth and Milford's Aggressive Fund.
Akahu
NZ's open-banking aggregator, lets apps see your KiwiSaver balance with permission.
- Akahu is a Kiwi fintech that connects to NZ banks and KiwiSaver providers and lets you share your data with apps you choose. Used by personal finance tools to pull live balances. You stay in control of which apps see what.
Annualised return
The average yearly return over a multi-year period.
- If a fund returned 50% over 5 years, the annualised return is 8.45%. the constant annual rate of return that, compounded, would have produced the same total. Lets you compare 1-year returns to 10-year returns on the same scale.
Asset classes
The five categories Sorted uses: shares, property, bonds, cash, and 'other'.
- Every KiwiSaver fund is a mix of these five. Growth assets (shares + property) drive long-term returns but swing more. Income assets (bonds + cash) are steadier but grow slower. The mix is what separates a defensive fund from an aggressive one.
See also: Passive management, Benchmark
See also: Growth fund, Risk band
See also: Compound interest
See also: Growth assets, Income assets
B
Balanced fund
Roughly 50/50 split between growth and income assets. the middle-of-the-road option.
- Balanced funds split between shares (50–60%) and bonds/cash (40–50%). Suited to medium horizons (5–9 years) where you want some growth but can't risk a big drop. Most KiwiSaver default funds are balanced.
Benchmark
The market index a fund is measured against. e.g., the S&P/NZX 50 for NZ shares.
- A benchmark is the standard a fund's performance is judged by. If the NZ share market returned 10% and a fund returned 8%, the fund underperformed its benchmark. Active funds aim to beat their benchmark; passive funds aim to match it.
See also: Growth fund, Conservative fund
C
Compound interest
When your returns earn returns. The reason small differences in fees or contributions compound to huge differences over decades.
- Albert Einstein supposedly called compound interest 'the eighth wonder of the world'. Over 30 years, a 0.5% extra fee can cost you tens of thousands in retirement, because the fee compounds against your balance every single year.
Conservative fund
Mostly bonds and cash with a small share allocation. Steady but modest returns.
- Conservative funds typically hold 20–40% growth assets and 60–80% income assets. Suited to people within ~5 years of retirement, first-home buyers within 2–4 years, or anyone who can't stomach big swings.
Currency hedging
Removing the impact of exchange-rate movements on overseas investments.
- If you own US shares and the US dollar strengthens against the NZ dollar, you make money even if the shares didn't move. Hedging cancels that out. Most NZ KiwiSaver funds partially hedge their global shares. typical hedge ratio is 50–70%.
See also: Balanced fund, Defensive fund
D
Default KiwiSaver fund
A government-designated 'safe' fund you're auto-placed in if you don't pick one yourself.
- Since 2021, default funds are conservative-leaning balanced. designed not to lose much when markets drop. The government rotates default providers every few years. Currently includes BNZ, Booster, BT Funds, Kiwi Wealth, Simplicity, Smartshares.
Defensive fund
Mostly cash and short-duration bonds. for very short horizons or active drawdown.
- Defensive funds keep your KiwiSaver close to cash-like. Good for first-home buyers within 1–2 years, or retirees actively drawing down. Returns are low (3–5%/yr) but drops are tiny.
See also: Conservative fund, cash
E
ESCT
Employer Superannuation Contribution Tax. the tax employers pay on their KiwiSaver contributions.
- Your employer's 3.5% KiwiSaver contribution is taxable. ESCT is the rate they pay on it (10.5% to 39% depending on your salary). Higher-salary workers see a bigger chunk of the employer contribution lost to ESCT.
F
FAP
Financial Advice Provider. anyone who gives regulated financial advice in NZ must be one or operate under one.
- FAPs are licensed by the FMA. They have to meet competence, conduct, and disclosure standards. Smiths Insurance and KiwiSaver is FAP-licensed (FSP712931). When someone calls themselves a 'financial adviser' in NZ, they must be working under a FAP.
First Home Grant (closed)
A former Kāinga Ora deposit top-up — closed to new applications since May 2024.
- The First Home Grant (up to $5,000 single / $10,000 couple, earned at $1,000 per year of KiwiSaver contributions) was closed to new applications in the May 2024 Budget and is no longer available to new buyers. First-home buyers now rely on the KiwiSaver first-home withdrawal instead. We mention it only because older guides still reference it.
First-home withdrawal
After 3 years of KiwiSaver membership, you can withdraw most of your balance to buy your first home.
- You must have been a member for 3 years, never have owned a home before (or be a 'second-chancer'), and intend to live in the home for 6+ months. You must leave $1,000 in the fund. The withdrawal can include all your contributions, your employer's contributions, government contributions, and the returns earned on all of those.
FMA
Financial Markets Authority. NZ's financial regulator.
- The FMA licenses financial advice providers, supervises KiwiSaver schemes, and enforces conduct rules. They publish annual KiwiSaver reports and can fine or suspend providers who breach the rules.
FSP number
The unique number every NZ financial service provider has on the public register.
- Every adviser, FAP, and KiwiSaver scheme is registered on the FSPR (Financial Service Providers Register) and gets a unique FSP number. Smiths Insurance and KiwiSaver is FSP712931. You can look up any provider by FSP number on the public register.
FUM / AUM
Funds Under Management. the total dollar value the manager looks after.
- FUM (or AUM, Assets Under Management) is the size of a fund or scheme. Bigger isn't necessarily better. but it tells you how established a manager is. Milford manages ~$25B across all funds; a small new manager might be $50M.
See also: FMA, FSP number
See also: First-home withdrawal
See also: First Home Grant (closed)
G
Government contribution
Up to $260.72 a year from the government if you contribute at least $1,042.86 yourself.
- Officially the 'KiwiSaver government contribution' (formerly the member tax credit). You get 25c for every $1 you contribute, up to $260.72/year — provided you're aged 16–64 and earn under $180,000. (It was halved from $521.43 in the 2025 Budget, effective 1 July 2025.) It hits your account around late July each year. Many Kiwis miss out on the full amount. a free top-up worth claiming.
Growth assets
Shares and listed property. the parts of a fund that drive long-term returns and biggest swings.
- Growth assets typically deliver 7–10% long-term returns but can drop 30%+ in a bad year. The percentage of growth assets is the single biggest determinant of a fund's risk band.
Growth fund
75–90% growth assets. for 7+ year horizons.
- Growth funds are mostly shares (NZ, Australian, global) with a smaller fixed-interest allocation. Best annualised returns over 10+ year periods, but expect 1–2 down years per decade. Suited to 30s/40s saving for retirement.
See also: Income assets, Asset classes
See also: Aggressive fund, Balanced fund
I
Income assets
Bonds and cash. the steady part of a fund.
- Income assets deliver lower long-term returns (3–6%) but with much smaller swings. They cushion the fund when shares fall. Defensive and Conservative funds are mostly income assets.
See also: Growth assets
K
KiwiSaver
NZ's voluntary workplace savings scheme. every working Kiwi is auto-enrolled at 18+.
- Launched 2007. You contribute 3%–10% of salary, your employer adds at least 3.5% (the default rose from 3% on 1 April 2026, and rises again to 4% from 1 April 2028), and the government tops up 25c for every $1 you put in — up to $260.72/yr if you contribute at least $1,042.86. Locked in until 65 (or first home, financial hardship, or serious illness).
See also: PIR, Default KiwiSaver fund
L
Lifecycle / target-date fund
A fund that automatically dials down risk as you get older.
- Starts you in growth/aggressive in your 20s, gradually shifts to balanced in your 40s, then conservative as you near retirement. Removes the need to pick funds yourself, but has been criticised for de-risking too early in NZ.
LOA
Letter of Authority. what you sign so we can talk to your provider on your behalf.
- If you want help switching KiwiSaver, your new adviser needs an LOA from you to gather your existing fund details, fees, and balance from your current provider. Lets the adviser do the paperwork and chase up the change without you being on every call.
M
Morningstar
Independent fund research firm. publishes the quarterly NZ KiwiSaver Survey.
- Morningstar's quarterly KiwiSaver Survey is the standard source for fund-level performance data in NZ. It's where Smiths' '#1 in NZ over 10 years' claims are sourced from. Free to read, available on their website.
P
Passive management
A fund that tracks a market index (like S&P 500) instead of picking shares itself.
- Passive funds aim to match a benchmark, not beat it. Cheaper to run (fees of 0.2–0.6%) because there's no expensive analyst team. Examples in NZ KiwiSaver: Simplicity, Kernel, Smartshares.
PDS
Product Disclosure Statement. the legal document describing a fund.
- Every KiwiSaver fund has a PDS. required by law, lays out the strategy, fees, risks, and rules. You should read the PDS before switching into any fund. They're long but skim-able; key sections are 'fees', 'risks', and 'how to withdraw'.
PIE
Portfolio Investment Entity. the tax structure used for KiwiSaver funds.
- PIEs let multiple investors share a single tax structure. Returns are taxed at your PIR rather than your marginal income tax rate, which is usually cheaper. Almost every NZ KiwiSaver fund is a PIE.
PIR
Prescribed Investor Rate. the tax rate on your KiwiSaver returns. Usually 10.5%, 17.5%, or 28%.
- PIR is set based on your income. Most workers earn enough to be on 28% but aren't sure. Get the PIR wrong and you either overpay tax on your returns (most common) or face a top-up bill from IRD at end of year. We have a free PIR Checker.
See also: Active management
See also: PIR
See also: KiwiSaver
R
Risk band
The 5-tier classification: Defensive, Conservative, Balanced, Growth, Aggressive.
- Sorted classifies funds by their growth-asset percentage: Defensive (0–10% growth), Conservative (10–35%), Balanced (35–63%), Growth (63–90%), Aggressive (90%+). The right band depends on your timeframe and risk tolerance.
S
SIPO
Statement of Investment Policy and Objectives. the rulebook for how a fund is run.
- Each KiwiSaver scheme publishes a SIPO. It sets out what the fund can and can't invest in, what its target asset allocation is, and how it manages risk. Required by law. The PDS is the marketing summary; the SIPO is the actual rules.
Sorted risk indicator
A 1–7 score showing how volatile a fund has been over the last 5 years.
- Calculated from price movements; not a measure of how safe a fund is. A 7 means the fund swings a lot (bigger drops, bigger gains); a 1 means it's stable. Higher numbers usually correlate with higher long-term returns.
SRI / ethical
Socially Responsible Investment. funds that screen out fossil fuels, weapons, etc.
- SRI funds exclude industries the fund manager (or its members) consider harmful. Common exclusions: weapons, tobacco, gambling, fossil fuels, adult industries. Pathfinder, Booster Socially Responsible, and parts of Generate are NZ examples.
Supervisor
The independent body that holds a KiwiSaver scheme's assets and oversees the manager.
- Required by law. The supervisor is separate from the fund manager and protects member interests. If a manager misbehaves, the supervisor can step in. Common NZ supervisors: Public Trust, Trustees Executors, Anchorage Trustee Services.
Switching
Moving your KiwiSaver from one provider or fund to another.
- You can switch providers as often as you like. but each switch can take 10–35 days during which your balance is in transit. You can switch funds within a provider for free, usually instantly. Smiths handles the switch paperwork for you.
T
Trail commission
Ongoing commission paid to advisers from KiwiSaver funds. typically 0.2–0.5% of FUM/yr.
- KiwiSaver schemes pay advisers an annual trail commission from the management fee for as long as you stay in the fund. Smiths is FAP-licensed and does receive trail commission from the schemes on our advised panel. typically in the 0.25%–0.5% range, varying by provider. The full breakdown is in our FAP disclosure at smiths.net.nz/disclosure. We do not adjust our advice based on which scheme pays the higher trail.
W
Withholding tax
Tax taken at source from interest or dividends, before you ever see it.
- Inside a KiwiSaver fund, the manager pays withholding tax on interest and dividends earned. You don't need to do anything. it's automatic. Different from PIR, which applies to total fund returns at your end.
See also: PIR
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