Changes are being sought to the terms and conditions that govern the KiwiSaver provider schemes to prevent a potential $14 billion retirement savings time bomb.
ANZ Wealth managing director John Body said savers continued to be enrolled in conservative funds through the default scheme options.
"This ticking time bomb inside KiwiSaver is a $14 billion shortfall for current New Zealand savers and would continue to blow out as more people enrol in the scheme in coming years."
Research by ANZ Wealth and OnePath, the country's largest KiwiSaver funds manager, estimated that under the current default settings, about 191,000 New Zealanders could face a shortfall of $72,000 each in their final account balance when they turned 65.
That compared with the final balance an average member could experience after 40 years with an investment strategy that changed as the circumstances of their lives changed.
Mr Body said the research demonstrated that long term, investors were likely to be significantly better off through the life stages approach than with the current default "conservative option".
Forsyth Barr superannuation specialist Damian Foster has long advocated younger people, in particular, not be put into conservative funds.
"Although a 'life stages option' is a good start, and would definitely be an improvement to the current status quo, I don't believe it goes far enough to assist the members automatically enrolled in default funds.
"A one-size-fits-all approach to investing is always going to be flawed," he said.
Mr Foster believed more needed to be done to encourage those members enrolled by default to select an investment fund that suited them personally, rather than having one automatically allocated to them.
For those who needed assistance in choosing, quality investment advice should be available to help them understand and keep track of their retirement nest egg, he said.
Mr Body said the ANZ and National Bank KiwiSaver schemes already used the life stages investment fund selection as the default setting for people who did not select their own investment fund.
However, people who did not actively select their own scheme provider were put into one of six default schemes.
Under the current terms and conditions for KiwiSaver default providers, new members were automatically defaulted into conservative investment funds if they did not choose their own fund.
"Over the medium to longer term, and this is what the vast majority of retirement savings plans are designed for, conservative funds can seriously disadvantage the saver."
Mr Body said it was a major problem that was missed during recent debates around retirement savings.
ANZ recommendations
0-35 ... Growth
36-45 ... Balanced growth
46-55 ... Balanced
56-60 ... Conservative balanced
61-64 ... Conservative
65 plus ... Cash
