KiwiSaver fees top $36 million

KiwiSaver providers just over $36.6 million in fees and expenses over the 12 months to March 31 this year, according to the latest report from the Government Actuary (GA).

The KiwiSaver report, tabled in Parliament on Wednesday, revealed the GA had also rejected an argument that smaller schemes could raise fees “if low membership meant that such an increase was necessary to cover the expenses”.

The GA judges KiwiSaver fees on the basis that they be “not unreasonable”.

In another major ruling during the year, the GA said its approval of KiwiSaver fees “does not in itself provide tacit approval of any form of investment”.

The report says KiwiSaver trustees must ensure all investment options meet legal requirements. As well the GA paper says providers must get written consent from members for investing in “complex” options.

“… if the investment option is complex then I would expect the Trustee to obtain written confirmation that the potential member understands the particular investment risk,” the GA report says.

About half of all KiwiSaver funds were invested in default funds as at March 31, which the GA says was probably an advantage during the global financial crisis.

“… it is hoped that as members see how the funds work in practice they will consider other investment options,” the GA says.

The GA also highlighted a couple of other “minor issues” including some providers missing the 35-day deadline to transfer funds to another scheme following a member request.

It also says there are some issues of questionable selling practices which are being investigated.

In a further superannuation report, tabled this week, the GA notes KiwiSaver may be starting to cannibalise existing superannuation schemes.

While the trend for stand-alone super schemes shifting to master trusts has continued the report says others are closing in favour of KiwiSaver or splitting contributions.

KiwiSaver survey: the full numbers revealed

In a year that has seen two KiwiSaver providers close up shop, the big bank brands were again dominating fund flows, the second annual Good Returns KiwiSaver survey has found.

View full KiwiSaver table here

According to the figures, as at March 31 the Commonwealth Bank-owned ASB once more topped the list as the single largest KiwiSaver scheme with almost $450 million in funds under management and over 170,000 members compared to $101 million under management and 72,305 members at the same time last year. The ASB-owned FirstChoice scheme also totallled 11,213 members and $37.3 million as at the end of March this year.

However, ING was the most successful overall provider with a total 212,732 members and $523 million across the four schemes it manages – the ING default scheme, ANZ, National Bank and SIL.

The survey, which represents about $2.6 billion in funds under management and almost 980,000 KiwiSaver members, showed the average member balance as at March 31 this year was approximately $2,650 with a wide range across the providers. The Huljich KiwiSaver scheme recorded the lowest average member balance of $670 while the tiny $1.55 million Brook Asset Management scheme scored the highest average with over $7,045 per member.

Among the larger providers, ING’s SIL scheme reported the highest average member balance of $3,463 with its sister bank products managed by ANZ and the National Bank recording the lowest averages of $1,745 and $1,724 respectively.

While the default providers and other major institutions carved out the lion’s share of the KiwiSaver market several mid-tier players were also snapping at their heels, most notably the Gareth Morgan scheme which reported $142.2 million in funds under management as at March 31 this year. Fisher Funds ($53.56 million), Fidelity Life ($37.3 million) and Medical Assurance ($35.6 million) have also accumulated respectable funds under management.

During the year two smaller providers the Australian-backed Eosaver scheme and the union-controlled IRIS scheme shut down after failing to meet growth expectations. The 3,254 Eosaver members, who had collectively accumulated almost $6 million at its close, were given three months to select a new provider before being allocated to a default scheme. Meanwhile, IRIS negotiated a deal with the Gareth Morgan scheme to transfer members. It is understood about 80% of the 1,076 IRIS KiwiSaver members opted for the Gareth Morgan scheme.

See the full report on who is winning the battle for KiwiSavers here