Kiwisaver Neither Guaranteed Nor Ghastly

The "too-safers" were revealed in a UMR Research survey that found 48 per cent of KiwiSaver members think it has a government guarantee – which is not true. A further 37 per cent aren’t sure, leaving a mere 15 per cent who know there is no guarantee.

What’s more, a full 62 per cent of those who said they know lots or a fair bit about KiwiSaver got this wrong, compared with 37 per cent of those who said they know "not that much" or "hardly anything". The cliché "a little knowledge is a dangerous thing" is not a cliché for nothing.

Meanwhile, others are blowing the significance of revelations about one KiwiSaver provider's shenanigans out of all proportion, pronouncing all of KiwiSaver as a shark-infested rip-off.

The truth is that the scheme carries some risk at two levels:

• The provider. It seems fairly unlikely a provider would get into trouble in a way that would seriously hurt its KiwiSaver members. If a provider wasn't doing well, it could sell or close down its KiwiSaver scheme, but that shouldn't affect members, who are not investing in the provider's business.

Instead, they are investing in shares, property, bonds, bank deposits, government stock and so on – issued by a wide range of businesses.

It's the job of each scheme's trustee to check that those investments are in fact made.

If your provider wants out, your investment will be transferred to another provider and its value shouldn't change. If you don't like the new provider, you can always move, simply by contacting the provider you prefer. They will do the switching for you.

Of course it's always possible that a provider will commit fraud or deceive those who monitor it – despite government plans to make this less likely in the next couple of years. That's why you should choose a company you trust. Even then you can't be certain, but nor can you be certain of your bank or insurance company.

If you're not prepared to take a bit of risk, stay out of KiwiSaver.

But you'll pay a price for your reluctance, missing out on the government kick-start and tax credits as well as employer contributions. Some of your tax dollars will go into other people's KiwiSaver accounts.

• The investments your fund makes. Conservative funds are low-risk, with little likelihood the value of your investment will ever fall much. Then come balanced funds, with a combination of higher and lower risk investments, and finally the riskier funds – which mainly invest in shares and sometimes some commercial property.

While investments in riskier funds are likely to grow more over the long haul, your balance will fall often – and sometimes a long way.

If you can't stomach that, or you expect to take out your money within the next five to eight years, move to a lower-risk fund.

In most cases your provider can make that move for you. If your provider doesn't have a lower-risk fund, move to a provider that does.

So where are we? KiwiSaver has no guarantees. It's possible – but unlikely – that you could lose from a provider's bad behaviour, so move to a provider you feel comfortable with. And if you don't like a rocky ride, move to a low-risk fund.

But don't stay out of KiwiSaver, or stop contributing. The incentives make it such a good deal that it's worth taking a bit of risk to be onboard.