Locked in losses: KiwiSaver and the pandemic-panic

In November 2019, Janet (aged 60), contacted her KiwiSaver provider to discuss whether she was in the right type of KiwiSaver fund. The provider advised Janet she was in the highest risk fund, a Growth Fund, and had been since 2017.


Janet asked where she should keep her funds – should she switch out of the Growth Fund? The provider said that Janet should consider how long it was until she would want to access her funds (she may not necessarily need to access all her funds when she turned 65), and consider the level of risk she was comfortable with.


Janet also asked how she could ensure she would reach a target balance in her KiwiSaver account once she was 65. The provider referred Janet to an online KiwiSaver calculator which would help her make a decision about this. The provider emailed Janet some information about their different funds, and said it was her decision to make about which type of fund she should be in. Janet remained in the Growth Fund.


Janet’s KiwiSaver balance begins to fall

In mid-February 2020, Janet’s KiwiSaver balance was $90,000. However, as the Covid-19 pandemic started to escalate, there were market-wide downturns. By 23 March 2020 (when New Zealand was heading into the first level 3 and 4 lockdowns), Janet’s balance had reduced to $74,000. This was very stressful for Janet and she called the KiwiSaver provider.


In the call, Janet said the provider should have contacted her earlier in the year to advise that the Covid-19 pandemic could affect her account balance. The provider said that there are market downturns and corrections, and that it was a matter of waiting out the downturn caused by the pandemic, especially as the Growth Fund had a five-year minimum investment time frame. Janet said she wanted to switch to the Conservative Fund, and this was later actioned by the provider once Janet had sent her instructions by email.


Janet asks the provider for information about her losses

Over the next few months, Janet asked her provider to send her a large amount of information about the asset allocations of the provider’s KiwiSaver funds, how the Growth Fund had performed between January and March 2020, and the steps the provider had taken to minimise the effect of the pandemic on investors. There were some delays in the provider sending the requested information to Janet.


Janet complains

In July 2020, Janet complained to the provider that it had caused her KiwiSaver balance to drop significantly by March 2020. Janet also said that if the provider had not delayed in sending her the information she’d requested in the months following March 2020, she’d have moved back to the Growth Fund, which had recovered relatively quickly after the downturn in March 2020.


Janet and the provider were unable to resolve the complaint and Janet asked FSCL to investigate her complaint.



There were three issues:

1)               Could or should the provider have contacted their customers in early 2020, as the pandemic escalated, in an attempt to help customers minimise potential losses?


2)               Did the provider do enough in November 2019, and March 2020, to help Janet ensure she was in the correct KiwiSaver fund? If the provider had done things differently, would she have switched to a Conservative Fund in November 2019, and not suffered such a loss in March 2020 (Growth Funds having suffered higher losses than Conservative Funds). Would she have remained in the Growth Fund in March 2020?


3)               Did the provider’s delays in sending the information Janet requested after March 2020, mean that she was unable to make an informed decision about whether to switch back to the Growth Fund?




Minimising customers’ potential losses?

We said that the provider could not predict there would be a pandemic and a resulting market-wide downturn. We also said it would have been incorrect (and impractical) for the provider to actively contact all their customers in early 2020 to advise there could be a decrease in their balances if the pandemic continued to escalate.


The reason it is not usually recommended to switch funds when there is a sudden market downturn is because then losses are crystallised. This is what happened to Janet; because she quickly decided to switch out of the Growth Fund after the fund’s value fell, she was unable to benefit from the Growth Fund’s reasonably quick recovery.

No personalised advice provided

Although the provider was not giving Janet personalised financial advice in either November 2019 or March 2020, the provider could and should have done more on both occasions to suggest that Janet speak to a financial adviser who could have provided her personalised advice.


However, even if the provider had taken that step, there was insufficient evidence to show that Janet would have then spoken to a financial adviser and, more importantly, that she would have actually switched from the Growth to the Conservative Fund in November 2019, or remained in the Growth Fund in March 2020.


Delays in providing information did not cause a financial loss

We said that although, overall, the delays in the provider sending Janet the information she requested after March 2020 were reasonable (because the information she requested was complex), we thought there were some periods of delay that could have been avoided.


However, ultimately, we said those delays did not cause Janet a financial loss. The information Janet had requested after March 2020 was all about what had already happened – the information was about the losses suffered by her investment in the Growth Fund in early 2020.


Janet could have asked for information about how the Growth Fund was performing after March 2020, but she did not. And, in any event, that information was freely available on the provider’s website. In other words, if Janet’s real intention had been to move back to the Growth Fund soon after the sharp decline in March 2020, she could have accessed the information she needed to make an informed decision about whether to do this.



We said the provider had not caused Janet any financial loss. Unfortunately, it was the sharp, market-wide pandemic-led downturn in early 2020 that caused Janet’s loss.


Insights for consumers

This complaint highlights that when there is a market shock, you should not panic. Sharp market downturns occur but eventually the market will recover, sometimes very quickly. A number of New Zealanders took the action Janet did in early 2020 and switched from Growth to Conservative KiwiSaver funds. Unfortunately, like Janet, a lot of people then crystallised their losses.

If in doubt as to what to do, we suggest obtaining personal financial advice from a financial adviser.