KiwiSaver

Impressive returns in equities and property have helped KiwiSaver growth funds achieve strong results in 2012, according to Morningstar’s latest KiwiSaver survey.

In the 12 months to December 31 growth fund returns averaged 14.0%, well ahead of balanced funds (12.4%), moderate funds (9.7%) and conservative funds (including default options), which averaged 7.9%.

The double-digit returns enjoyed by growth investors were driven by equities, which returned 24.18% on the NZX 50 and 9.52% in global shares in 2012, and listed property, which returned more than 20% for the year both in New Zealand and globally.

Fixed interest didn’t fare so well, with New Zealand bonds returning only 5.14% for the year and global bonds providing a more substantial 8.39% return.

The three-year performance of growth funds (6.6%) has now caught up to conservative funds (6.0%) after taking a hammering in the early days of KiwiSaver post-GFC, but five-year returns (2.7% versus 5.3%) are still lagging.

The Aon Milford fund was the top performer in 2012 returning 26.8%, while the Milford Active Fund has been the top performer over five years with an average return of 11.6%.

“The best-performing KiwiSaver options over the past five years continue to be SIL KiwiSaver (as well as National Bank and ANZ KiwiSaver) in the Conservative, Balanced, and Growth Multi-Sector categories,” Morningstar said in its report.

“Fidelity KiwiSaver has also performed strongly in the Balanced and Aggressive Multi-Sector categories. Others worthy of mention include Aon KiwiSaver Russell in the Conservative and Moderate categories, Brook KiwiSaver across Balanced and Growth, and Fisher Funds KiwiSaver Growth.”

Overall KiwiSaver funds under management reached $13.6 billion at the end of December, an increase of $3.3 billion in one year. The largest providers are OnePath ($3.4 billion) and ASB ($2.9 billion) who account for more than 46% of KiwiSaver assets between them.

Conservative funds ($5.1 billion) continue to be favoured by investors and are more than double the size of balanced funds ($2.4 billion) and growth funds ($2.2 billion); as a result, more than 56% of KiwiSaver money is invested in cash and bonds.

More than five years after KiwiSaver began, BNZ looks set to finally join the game.
 

BNZ has long been the only major bank without its own KiwiSaver product and has instead offered the AXA KiwiSaver scheme to retail customers and the AMP KiwiSaver scheme to business clients.

But it has now registered a KiwiSaver scheme with the Financial Markets Authority.

BNZ Investment Services is listed as the manager of the scheme and Guardian Trust as the trustee.

BNZ’s scheme has been in the pipeline for some time and the bank employed Tracey Berry, who set up KiwiSaver schemes at both Kiwibank and Westpac.

By entering the game so late BNZ has given up a lot of ground to its competitors; according to the latest Morningstar figures ANZ-owned OnePath and ASB control a combined $6.3 billion, 46% of the KiwiSaver market.

Last year Parliament scuppered BNZ’s plan to offer a mortgage-linked KiwiSaver product by banning such a product tie-in.

The late entry of BNZ has sparked speculation it may buy the wealth management business of Tower, which is a default provider and has just under $900 million under management in its KiwiSaver scheme and $4.2 billion overall.

Former Fisher Funds chief investment office Warren Couillault is involved in a new venture that has launched a KiwiSaver scheme.

The Generate KiwiSaver scheme, New Zealand’s newest KiwiSaver scheme, was registered with the Financial Markets Authority on December 17.

Generate Funds was established in November and its directors include Couillault and Peter Brook, an independent director of the Argosy property fund.

One of its shareholders is Henry Tongue, who was a senior portfolio manager at the Huljich KiwiSaver scheme which was bought by Fisher Funds for just under $21 million after its founder Peter Huljich got into trouble for misleading investors.

Couillault left Fisher Funds in 2008 and in 2011 teamed up with the Rich Listed Spencer family to launch fund management firm Richmond Investment Group, which offered funds-of-funds that invested in a group of undisclosed hedge funds.

No investment statement or prospectus has been released for the Generate scheme yet.
 

KiwiSaver should be made compulsory and contribution rates should be increased, the scheme’s founder Sir Michael Cullen told a conference yesterday.

The former Finance Minister has also mooted making annuities compulsory or implementing a one-off tax on KiwiSaver schemes at maturity to help reduce future New Zealand Superannuation costs.
Under Sir Michael’s plan, KiwiSaver would become compulsory in 2016 with minimum contribution rates of 4% for employees and 4% for employers, not far below Australia’s compulsory super rate of 9%, soon to be raised to 12%.  “With the number of KiwiSavers already far higher than forecast it is not a long step to make the scheme compulsory, tighten some of the criteria, and, over time, gear it up to a level far closer to that planned in Australia,” he said.

“At that point the relationship between KiwiSaver and New Zealand becomes one for serious discussion.” Sir Michael said KiwiSaver in its current form may boost retirement incomes but does nothing to reduce the cost to taxpayers of NZ Super. He explored two options to reduce this cost: in one scenario KiwiSaver members would be required to use half of their accumulated savings to purchase an annuity, with the state topping up those who had a retirement income lower than the current superannuation formula.

This would reduce the cost of NZ Super to under 2% of GDP by 2050 and next to nothing by the end of the century, he said. The second option, which had “significant advantages in terms of simplicity and fairness”, would be to raise the age of NZ Super eligibility to 67 and put a “withdrawal” tax of 10% or 15% on KiwiSaver that would apply at maturity or when people permanently emigrated.

Sir Michael said this option would reduce the cost of NZ Super by about 5% of GDP, would be administratively much simpler than the first option and would avoid the difficulties of income testing, although any changes in the area would be “fraught”. He also suggested transferring state asset shares into a holding company owned by the New Zealand Superannuation Fund, which he also set up during his time as Finance Minister.  

Prime Minister John Key has promised to resign before making any changes to NZ Super eligibility.