KiwiSaver

There is potential for KiwiSaver to grow the retirement savings pool but it is unclear whether that has been the case so far according to industry experts.

Speaking at the Workplace Savings conference in Christchurch Inland Revenue senior evaluator Katherine Meerman says it is an important but unanswered question.

“Because if KiwiSaver isn’t growing the retirement savings pool over and above what would have been the case, then what has been the point?”

She says there is some indication of the potential for growth in savings, but there are also indications of substitution behavior.

She says in terms of members, the pool has had relatively steady growth for the last two years, with an average of 30,000 people joining a month and membership at just under 1.5 million which represents 38% of the total eligible population.

Inland Revenue data shows over one third of members (37%) have joined through automatic enrolment, with two thirds (63%) opting in.

Meerman says without KiwiSaver 38% of households would have been unlikely to save for retirement.

From the funds perspective, in the three years to July 2010 Inland Revenue passed $6.6 billion in funds to providers for investment.

Meerman says in the big scheme of things KiwiSaver represents a growing but still relatively small percentage (9%) of the value of total funds under management. Of the value of superannuation savings KiwiSaver makes up close to 30%.

Meerman says taking Inland Revenue data into account, she has a foot in both camps as to whether KiwiSaver is growing the retirement savings pool or not.

This sentiment was matched by BT Funds Management senior product manager Sharon Mackay who says most KiwiSaver members are contributing 2% which is a great start, but not enough for retirement savings.

She also believes too many people are in conservative funds which is not necessarily the best level of risk for their profile.

However ASB head of group investments Greg McAlister believes the retirement savings pool is seeing growth.

He says ASB as a default provider, has 252,000 members and as of last month $1.23 billion in the fund which is a number well beyond its expectations. He says overall KiwiSaver numbers are also beyond initial treasury and provider forecasts.

 

Most KiwiSaver funds were in the red over the second quarter as the markets had their first pullback after four positive quarters of strong results according to the Morningstar quarterly KiwiSaver Performance Survey.

Morningstar says the pullback was due to the global recovery being put on hold in May after uncertainties as a result of some European countries’ overhanging debt, a slowdown in China, and disappointing economic data across the globe.

As a result the New Zealand sharemarket lagged most global counterparts during the second quarter and the NZX50 Index was down 9.05%, while Australia was down 15.62% for the June quarter, and global sharemarkets fell 7.96% in aggregate.

This meant only a few KiwiSaver funds remained in the black over the second quarter, and it was the cash and fixed income heavy options which tended to do the best.

This meant that the default options largely led the way.

Mercer and ING were the top performers among the default providers and the only options to post positive returns.

Morningstar says Mercer has been the dominant performer across the default providers, easily outpacing the pack over the one and two-year periods.  

ING and Mercer also posted admirable results when compared to all KiwiSaver funds.

Morningstar says other fund managers that deserve mention for table-topping results over the June quarter were Aon Russell, Mercer, and Grosvenor, which were among the best performers in the risk-conscious Conservative and Moderate categories.

Aon Russell also performed well in the balanced, growth, and aggressive categories alongside Tyndall and Tower.

Looking out over two years is of course a better indicator of a fund manager’s performance record. Over this period, AMP, Aon Russell, AXA, and Mercer did well in the conservative and moderate categories.

In the more growth categories Fisher Funds Growth, ING, and Mercer were the KiwiSaver options with the best results.

Morningstar says the second quarter again demonstrated the perils of performance-chasing, as many of the top performers over the past year were among the bottom-dwellers when markets fell.

But the performance gap among KiwiSaver funds is opening up. In the Moderate and Balanced categories, for example, the difference between the best and worst performers over a two-year period was 7.34% and 4.79%.

Morningstar says the next quarterly report will be the three-year anniversary of KiwiSaver and while it’s still early days, given the upheaval in markets over this period, it will be a very interesting time to look at medium-term results.

As for assets under management, ING and ASB were the dominant players at June 30, with just over 40% of KiwiSaver assets between them. Below this pair was a tight group hovering above 5% – the default providers and Westpac are in this mix. Gareth Morgan is also in this group, with 5.60% of market share, while the rest of the providers fight it out for the remaining 10% of the pie.

KiwiSaver assets on the Morningstar database have grown from $954.10 million at 30 June 2008 to $5.77 billion at 30 June 2010.

 

The latest KiwiSaver Performance Survey results from Morningstar.

KiwiSaver Performance Survey – Returns to 30 June 2010
Default Options	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP (Default)	-0.46	0.58	5.05	3.13
ASB Conservative (Default)	-0.40	1.63	6.78	4.99
AXA Income Plus (Default)	-0.48	1.74	9.08	5.14
ING Conservative (Default)	0.15	2.08	7.82	5.17
Mercer Conservative (Default)	0.71	3.56	12.30	6.41
TOWER Cash Enhanced (Default)	-0.08	1.69	6.87	4.17
Multisector Options
Conservative	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP (Default)	-0.46	0.58	5.05	3.13
ANZ Conservative	0.03	2.01	8.20	5.14
Aon Russell Lifepoints Cnsrv	1.39	4.63	15.57	6.94
ASB Conservative (Default)	-0.40	1.63	6.78	4.99
Asteron Conservative	0.20	2.30	8.91	4.65
AXA Income Plus (Default)	-0.48	1.74	9.08	5.14
Fidelity Capital Guaranteed Kiwi	-0.04	1.44	5.04	4.27
Fidelity Conservative Kiwi	-1.50	1.53	7.98	4.35
FirstChoice Tracker Conserv	-0.42	1.60	6.76	4.99
Fisher Funds Conservative	-0.37	0.01	0.36	—
Gareth Morgan Conservative	-0.03	1.63	5.15	4.01
Grosvenor Enhanced Income	0.53	1.80	3.87	5.00
ING Conservative (Default)	0.15	2.08	7.82	5.17
ING SIL Conservative	0.02	2.06	8.31	5.33
Kiwibank Conservative	—	—	—	—
Mercer Conservative (Default)	0.71	3.56	12.30	6.41
National Bank Conservative	0.01	2.01	8.22	5.20
Smartshares Smartkiwi Conservative	-1.44	-0.30	4.53	3.37
TOWER Cash Enhanced (Default)	-0.08	1.69	6.87	4.17
Average	-0.12	1.78	7.27	4.84
Moderate	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Conservative	-0.14	1.30	6.74	5.45
AMP Moderate	-1.31	0.06	6.94	2.08
ANZ Conservative Balanced	-1.56	0.79	9.45	3.71
Aon Russell Lifepoints 2015	0.18	3.33	16.64	4.83
Aon Russell Lifepoints Mod	-0.58	2.56	16.59	3.73
ASB Moderate	-2.30	0.50	9.53	2.81
AXA Conservative	-0.79	1.68	10.00	5.51
FirstChoice Active Conservative	-1.94	0.51	8.47	4.44
FirstChoice Tracker Moderate	-2.32	0.46	9.57	2.61
Grosvenor Conservative	0.09	2.52	8.26	5.33
Huljich Conservative Diversified	-2.41	-3.87	5.02	6.19
ING Conservative Balanced	-1.53	0.50	8.01	3.35
ING SIL Conservative Balanced	-1.50	0.94	9.73	3.97
Mercer Super Trust Conservative	0.01	2.73	12.09	4.50
National Bank Conservative Balanced	-1.56	0.81	9.48	3.71
Smartshares Smartkiwi Balanced	-6.73	-5.64	7.36	-1.83
TOWER Conservative	-0.04	2.96	11.16	4.42
Westpac Conservative	-0.92	0.99	7.33	4.04
Average	-1.41	0.73	9.57	3.69
Balanced	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Balanced	-3.13	-1.91	7.27	-1.02
AMP Moderate Balanced	-2.45	-1.15	7.18	-0.20
AMP TOWER Balanced	-1.66	1.61	12.97	1.56
ANZ Balanced	-3.10	-0.44	10.50	2.28
Aon ING Balanced	-2.75	0.50	15.51	3.77
Aon Russell Lifepoints 2025	-1.73	1.35	17.14	1.10
Aon Russell Lifepoints Bal	-2.61	0.38	17.40	0.09
ASB Balanced	-4.77	-1.45	10.15	-0.09
Asteron Balanced	-2.71	-0.13	11.26	2.60
AXA Balanced	-4.93	-2.15	11.49	1.30
Brook Professional Balanced	-5.67	-3.59	3.70	0.95
Fidelity Balanced Kiwi	-4.36	-0.86	7.29	3.59
Fidelity Ethical Kiwi	-4.07	-1.15	6.68	-0.03
FirstChoice Active Balanced	-5.06	-2.11	9.21	0.34
FirstChoice Tracker Balanced	-4.80	-1.49	10.20	-0.13
Forsyth Barr Balanced Portfolio	-4.26	-2.74	5.90	-0.50
Gareth Morgan Balanced	-3.77	-2.05	2.84	-0.63
Grosvenor Balanced	-2.96	-0.08	9.12	3.35
Huljich Balanced Diversified	-3.70	-6.84	4.42	1.98
ING Balanced	-3.25	-1.04	8.14	1.39
ING SIL Balanced	-3.11	-0.35	10.72	2.59
Kiwibank Balanced	—	—	—	—
Mercer Balanced	-3.06	0.20	13.71	0.76
Mercer Super Trust Active Balanced	-3.19	0.07	13.46	0.71
Mercer Super Trust Moderate	-2.94	0.63	12.06	3.73
Milford Balanced	—	—	—	—
National Bank Balanced	-3.09	-0.40	10.49	2.35
TOWER Balanced	-3.07	0.62	10.77	1.44
Westpac Balanced	-4.79	-2.20	7.87	1.60
Average	-3.75	-1.13	9.64	1.27
Growth	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP ING SIL Balanced	-2.99	-0.83	13.16	0.73
AMP Growth	-4.65	-3.47	7.65	-5.45
AMP TYNDALL Balanced	-2.15	0.82	12.32	0.17
ANZ Balanced Growth	-4.58	-1.58	11.60	0.77
ANZ Growth	-6.19	-2.95	12.40	-0.90
Aon Russell Lifepoints 2035	-3.33	-0.33	17.29	-1.99
Aon Russell Lifepoints Growth	-3.83	-0.86	17.27	-2.66
Aon Tyndall Balanced	-1.68	1.18	12.76	0.07
ASB Growth	-7.33	-3.61	10.16	-3.16
Asteron Balanced Growth	-5.77	-2.96	11.92	-0.89
Fidelity Growth Kiwi	-6.82	-2.98	6.31	0.22
FirstChoice Active Growth	-7.58	-4.42	8.78	-1.96
FirstChoice Tracker Growth	-7.36	-3.64	10.21	-3.35
Forsyth Barr Growth Portfolio	-6.70	-5.32	4.64	-4.34
Gareth Morgan Growth	-7.67	-5.11	-0.78	-5.60
Huljich Growth Diversified	-5.09	-10.14	2.73	0.12
ING Balanced Growth	-5.00	-2.69	8.12	-0.52
ING Growth	-6.80	-4.42	7.93	-2.65
ING SIL Balanced Growth	-4.68	-1.65	11.73	1.02
ING SIL Growth	-6.13	-2.88	12.69	-0.57
Kiwibank Growth	—	—	—	—
Mercer Super Trust Growth	-4.58	-1.47	12.42	-1.41
National Bank Balanced Growth	-4.61	-1.56	11.62	0.73
National Bank Growth	-6.15	-2.90	12.45	-0.98
Staples Rodway Balanced	-4.55	-1.99	10.57	-1.63
Staples Rodway Growth	-3.99	-0.26	10.00	-1.14
Westpac Growth	-6.04	-3.62	8.15	-0.02
Average	-5.24	-2.68	10.16	-1.42
Aggressive	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Aggressive	-5.82	-4.71	7.71	-7.75
Aon Russell Lifepoints 2045	-4.77	-1.84	17.59	-5.04
AXA Growth	-7.95	-5.24	11.29	-2.44
Brook Professional Growth	-9.23	-6.37	5.58	0.34
Fidelity Aggressive Kiwi	-8.20	-2.42	9.98	1.20
First NZ Capital	-7.41	-4.17	4.17	-11.17
Fisher Funds Growth	-7.05	-3.38	16.93	6.12
Grosvenor Geared Growth	-7.73	-3.41	—	—
Grosvenor High Growth	-8.07	-3.91	8.42	-2.28
Mercer High Growth	-6.06	-2.81	13.11	-3.77
Mercer Super Trust High Growth	-6.22	-3.04	12.67	-3.91
TOWER Growth	-5.40	-1.25	12.92	-1.36
Westpac Capital Protection Plan (1)	-9.44	-6.39	7.63	—
Average	-7.18	-3.77	10.67	-2.73
Peer Group Averages	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Default Options	-0.09	1.88	7.98	4.83
Conservative	-0.12	1.78	7.27	4.84
Moderate	-1.41	0.73	9.57	3.69
Balanced	-3.75	-1.13	9.64	1.27
Growth	-5.24	-2.68	10.16	-1.42
Aggressive	-7.18	-3.77	10.67	-2.73
Single Sector Options
Cash	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Cash	0.93	1.83	3.75	5.23
ANZ Cash	0.49	0.98	2.01	—
Aon ING Cash	0.58	1.27	2.94	3.82
Aon Tyndall Cash	1.71	2.45	3.95	5.20
ASB NZ Bank Deposit	0.62	1.19	2.39	4.06
Asteron Capital	0.68	1.38	2.99	4.76
AXA Cash	0.77	1.64	3.96	4.62
FirstChoice NZ Cash	0.60	1.17	2.37	4.03
ING Cash Plus	0.55	1.13	2.37	4.03
ING SIL Cash Plus	0.42	0.86	1.82	3.47
Kiwibank Cash	—	—	—	—
Mercer Cash	1.54	2.36	4.14	5.28
Mercer Super Trust Cash	1.56	2.49	4.28	5.29
National Bank Cash	0.49	1.00	2.01	—
Staples Rodway Conservative	1.05	1.85	3.18	3.88
TOWER Preservation	0.69	1.43	3.00	4.54
Westpac Cash	0.63	1.30	2.87	3.79
Fixed Income	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron High Yield Fixed Interest	2.35	4.56	10.26	6.19
ING SIL New Zealand Fixed Interest	3.11	5.87	9.87	5.89
ING SIL International Fixed Int	2.96	4.48	7.59	9.46
Kiwibank NZ Fixed Interest	—	—	—	—
Kiwibank Global Fixed Interest	—	—	—	—
Mercer Super Trust Fixed Interest	3.72	7.82	17.63	11.47
Property	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron Global Property	-1.71	4.20	36.79	-11.74
ING SIL Australasian Property	-4.70	-7.71	11.67	-6.24
ING SIL International Property	-5.02	1.60	37.18	-11.43
Kiwibank Listed Property	—	—	—	—
Mercer Super Trust Real Assets	-3.83	-0.76	30.72	-5.59
Australasian Equity	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron SRI Share	-8.19	-6.36	7.54	-0.10
Asteron Trans Tasman Small Companies Shr	-11.15	-8.34	17.09	0.79
ING SIL Australasian Share	-8.50	-7.62	8.69	-0.74
Kiwibank Australasian Share	—	—	—	—
Mercer Super Trust Trans Tasman Shares	-7.68	-6.93	10.05	-0.11
Mercer Super Trust Shares	-9.40	-5.93	8.78	-7.43
Milford Aggressive	-3.76	-1.08	11.62	10.58
Smartshares Smartkiwi Growth	-12.25	-10.58	8.48	-6.61
International Equity	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron International Share	-8.32	-5.26	7.30	-9.15
FirstChoice Active High Growth	-10.01	-6.33	6.84	-10.85
FirstChoice Global Sustainability Fd	-7.41	-1.72	10.89	2.71
ING SIL International Share	-8.35	-3.05	7.61	-3.51
ING SIL Sustainable Growth	-7.64	-4.49	5.27	—
Kiwibank Global Share	—	—	—	—
Mercer Super Trust Global Shares	-10.09	-5.55	8.06	-11.06
TOWER Equity	-8.82	-3.94	11.31	-6.10
Miscellaneous	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Fidelity Options Kiwi	-4.08	3.63	18.86	7.73

 

(NB: Returns are before tax and after the fees deducted from the funds unit price.)

 

 

An investor pressure group is preparing a Petition to Parliament to request the Government review the default KiwiSaver provider status of ANZ-owned fund manager ING.

This comes after the Commerce Commission reached a record $45 million settlement with ANZ over the promotion of ING’s Diversified Yield and Regular Income Funds last month.

The Commerce Commission alleged that the promotion of the degree of investment risk in the two ING Funds was “misleading” and that there was sufficient evidence to pursue proceedings against both ING and ANZ for breaching the Fair Trading Act. The regulator decided against this course of action, saying the settlement was the best outcome for investors in the funds.

The Frozen Funds Group said it had decided to draw public attention to the risks that ANZ/ING’s behaviour presents to all New Zealanders who are saving on a regular basis for their retirement.

The Group says more than 14,000 New Zealander have seen $700 million of their life savings in the Frozen Funds jeopardised by ANZ/ING, yet currently, the same companies hold more than $1 billion of savings from nearly 300,000 New Zealanders in their KiwiSaver schemes.

“The fact the government contracted ANZ/ING in 2007 to be one of the six default KiwiSaver providers, gives ANZ/ING a level of respectability and trust that these companies may have merited at the time, but have lost since then.”

The Group believes there are four compelling reasons to review ANZ/ING as a default KiwiSaver provider.

Firstly, the Commission has concluded after its investigation that ANZ/ ING “engaged in misleading or deceptive conduct and/or made false or misleading representations”.

The Frozen Funds Group says ANZ/ING is a default KiwiSaver that challenges the regulator’s conclusions and yet “deftly avoids full disclosure by settling out-of-court”.

Secondly, the Group says a majority in Parliament wishes to debate a Private Member’s Bill that challenges the legality of the waiver that ANZ/ING made 99% of the investors sign as condition for a partial compensation, while the Commerce Commission’s inquiry was still on-going.

Thirdly, the Group believes the Commission also made the most damning assessment of the performance of ING as a fund manager.

The Commission said: “ING did not measure or manage risks, bought investments that it could not know the contents of, and did not perform appropriate returns attribution analysis.”

Fourth, the Frozen Funds Group believes a review and possible removal of ANZ/ING from the list of default providers would enhance competition in the market and signal to the other default providers to maintain standards.

“It would also signal to non-default KiwiSaver providers that there will be occasional vacancies at the top and that cooperative and ethical behaviour is rewarded. We believe non-default providers will support the envisaged Petition to Parliament,” says the Group.