in a nutshell

Annual Fee: 0.3%

Performance Fee: 0%

Funds Available: 4

Government Default Fund? Yes

Simplicity is one of the government's default Kiwisaver funds. It charges an annual management fee of 0.3%, which is among the lowest in the industry, along with 0% performance fees (meaning there's no extra fees - you keep all of your returns!) It has four different funds available to choose from.

Our opinion: We think Simplicity offers a reliable, easy-to-understand Kiwisaver scheme with some of the lowest fees in the industry. It's best suited for long term investors (younger than 40), who are looking for reliable growth investments with low fees. We are happy to recommend Simplicity as one of the best value and sensibly-run Kiwisaver funds available today.

Who Is Simplicity?

Simplicity is a non-profit Kiwisaver provider founded by Sam Stubbs, a former Goldman Sachs banker and former CEO of Tower Investments, and Andrew Lance, a former bond trader.

They are unique as a Kiwisaver provider - they're non-profit, and fee income funds their charity the Simplicity Foundation, which supports many grass roots movements around New Zealand. It has donated over $5 million to date.

Simplicity offers not only Kiwisaver funds but also managed funds for regular investors, plus a home loan offering specifically for first home buyers in their Kiwisaver scheme.

Simplicity is one of the default Kiwisaver schemes chosen by the NZ government.

Are Simplicity's Fees Lower Than Other Kiwisaver Funds?

Simplicity is one of the lowest fee Kiwisaver funds available, with a flat management fee of 0.3% per annum.

This means if your Kiwisaver has a balance of $10,000, you will pay an annual fee of $30.

The only Kiwisaver fund we know of that comes in cheaper is Kernel at 0.25%.

(Note: There may be some cash funds that have a lower fee, but we disregard those as we don't consider them viable long-term options for Kiwisaver).

We consider fees the number one criteria for choosing a Kiwisaver fund. Even a half percent extra in fees can mean a difference of hundreds of thousands of dollars in wealth over the long term.

As many Kiwisaver funds charge fees of 1% or higher, Simplicity is one of the best choices available when it comes to fees, which is why we're happy to recommend them.

What Kiwisaver Funds Does Simplicity Offer?

Simplicity offers four different funds:

Balanced Fund

Growth Fund

Conservative Fund

Default Fund

In reality, they only offer three funds, as the default fund is the same as the balanced fund. The distinction is the default fund is the fund you get put into if you don't select a specific fund.

I suspect they keep them distinct so they can adjust the default fund in the future without complications.

As of 2023, the asset allocations of each funds are as follows:

Balanced Fund

Intl Fixed Income 23%

NZ Fixed Interest 17%

Intl Shares 39%

NZ Shares 16%

Aus Shares 4%

Cash 2%

Growth Fund

Intl Fixed Income 11%

NZ Fixed Interest 8%

Intl Shares 53%

NZ Shares 21%

Aus Shares 6%

Cash 2%

Conservative Fund

Intl Fixed Income 42%

NZ Fixed Interest 33%

Intl Shares 16%

NZ Shares 6%

Aus Shares 1.6%

Cash 2%

What does this even mean?

Good question! 

If you're not from an investing background, this probably just looks like a bunch of meaningless numbers.

What you really need to know is this:

The Growth Fund has riskier investments. These tend to make more money over time (20+ years), BUT they will be more volatile in the short run (3-5 years).

The Conservative Fund has lower-risk investments. These tend to make less money over time (20+ years), but should be more stable over the short run (3-5 years).

The Balanced Fund is somewhere in between.

What this means for you:

If you plan on leaving your money in your Kiwisaver until you retire, and you're in your 40's or younger, then you are most likely to get the best returns putting your Kiwisaver in the Growth Fund, even though you might experience losses or volatility in the short term.

If you plan on taking your Kiwisaver out in the near future (either to buy a house or you will retire soon), then you are most likely to be safer putting your Kiwisaver into the Conservative or Balanced Fund.

Of course, these are just general guidelines.

It is entirely possible the conservative fund will outperform the growth fund over a long period and vice versa, but much less probable based on historical trends.

What's important is Simplicity has this range of funds available to you, so you can make the choice that's best.

You can switch between funds at any time. There are no switching fees.

What Is Simplicity's Investment Strategy?

For all of their funds, Simplicity employs a passive indexing strategy.

This is from their SIPO document:

We believe that markets are efficient. So we have adopted a predominantly passive index approach to investing. In the major markets we do not actively pick or select securities because we believe that using index funds and having very low costs will earn investors more money over time.

This means Simplicity does not attempt to beat the market, and simply invests in broad based index funds to match the market average.

This means when investing your Kiwisaver in Simplicity, you will receive the market average return on your investments over the long run.

This varies widely obviously, but typically ranges 7% to 10% per year for shares, and 2% to 5% for fixed interest, depending largely on the economy and geography.

How Have The Funds Performed?

Because Simplicity is a passive investment scheme which invests primarily in index funds, their funds have simply performed in line with the market averages.

As expected, the Growth Fund has outperformed the Balanced and Conservative fund over the long run (5+ years).

Obviously, the return of each fund changes daily.

You can see the latest returns of each fund on the Simplicity website by clicking here.

Can I Lose Money With Simplicity?

All investing contains risk, and Kiwisaver is no different.

However, Simplicity uses a time-tested strategy known as passive indexing, which doesn't attempt to trade individual stocks and instead invests in the entire market.

This strategy contains far less risk. In theory, as long as the economy grows over the long term, a passive stock market index will make money. 

In fact, over periods of 20 years or more, the US stock market has a 100% chance of returning a profit.

That doesn't mean losing money is impossible, but it is very unlikely over the long term in any of Simplicity's funds.

How Do I Get A Home Loan With Simplicity?

Simplicity has a unique feature of their Kiwisaver scheme which assists members to get first home loans.

If you're having trouble getting a mortgage from a bank, you could apply to Simplicity who may give you a mortgage at a competitive rate with less hoops to jump through.

All you need to do is have been a member of Simplicity Kiwisaver for more than 3 years.

You can read more about their home loan program here.

How To Withdraw My Simplicity Kiwisaver?

No matter which Kiwisaver provider you choose, whether it's Simplicity or someone else, your savings are locked in Kiwisaver until age 65.

However, there are some exceptions when your Kiwisaver can be withdrawn early:

These are:

  • You are experiencing serious financial hardship.
  • You have moved overseas.
  • You have a life-shortening medical condition (e.g. cancer).
  • You have a serious illness or disability (affecting your working ability).
  • You have died (your family can access).

You can also withdraw your Kiwisaver to put towards buying your first home.

What Happens If Simplicity Goes Bankrupt?

This is a great question. 

KiwiSaver is privately managed by banks and/or investment managers. To be a Kiwisaver provider, they must be licensed by the Financial Markets Authority, and are audited annually.

Simplicity is a default government provider, meaning it has received the government's stamp of approval that they are a trustworthy and recommended provider.

And even then, what happens to Simplicity is actually irrelevant. Simplicity is simply the manager of your funds, but they don't own your funds. Your money is actually held in a third party trust, which means Simplicity never has access to it.

Simplicity can only give instructions on which stocks and bonds your money gets invested in, but they can't get access to your money to use themselves, such as for paying their bills.

This means if Simplicity goes bankrupt, your Kiwisaver savings will be protected by the trust, and will simply be moved to another provider (presumably of your choice or the government's choice).

Verdict: Who Is Simplicity Suited For?

Due to the range of funds, we think almost all Kiwis are suited to Simplicity's Kiwisaver scheme.

Simplicity follows the John Bogle strategy of "index and chill", which is also recommended for most investors by the legendary Warren Buffett.

By investing in the market index, investors will reap the benefit of all the economic growth in the market with relatively little risk.

As all of Simplicity's funds invest in the index, getting a satisfactory return on your savings is as simple as "set and forget". There is no active trading done by the managers, they simply rely on the fact that over a 30 or 40 year period, the economy will grow and as a result your investment will grow with it.

If you have a 20+ year time horizon (meaning you're aged 45 or younger) you are perfectly suited for Simplicity's Growth or Balanced funds, as the fees are among the lowest you will find and you can simply enjoy the long term compounding.

If you're over 45, you may wish to opt for the Conservative fund, though the Balanced and Growth funds are still viable options, though with a small amount of additional risk.

The one type of investor who may not want their Kiwisaver with Simplicity is someone who wants to a manager to invest aggressively in individual stocks to try and beat the market. This is a much higher risk strategy and the opposite of what Simplicity offers, though there are fund managers out there who offer it.

How To Sign Up For Kiwisaver With Simplicity

You can sign up for Simplicity on their homepage by clicking the yellow button below.

Simply open an account and enter your IRD number, and they will transfer your Kiwisaver to their platform.

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