The Financial Services Council says the Government's decision to retain the conservative default funds approach to KiwiSaver means people will have to save a lot more, for a lot longer, and pay a lot more tax on those savings.
Chief executive Peter Neilson says many people who have enrolled into KiwiSaver have defaulted into conservative funds without making an active choice to be there.
Mr Neilson says if someone on the average wage, contributing 6% per annum, stays in a conservative fund for the next 40 years they'll end up with a nest egg at least $150,000 smaller than if they invested in a balanced portfolio.
He says what is needed is an effort on behalf of the industry and the Government to raise the level of financial literacy in New Zealand so people understand these choices.
Mr Neilson says in the absence of information people may make a choice that they regret by the time they get to retirement.
He says there is more work for the industry and Government in ensuring people get to the right sort of investment portfolio for their needs and their stage of life.
Mr Neilson says the OECD recommends a life stages approach to default investment so younger people invest in more growth assets and then move into conservative funds close to retirement.
