KiwiSaver

There appears to be an appetite among KiwiSaver members to take home less pay now in order to boost their retirement savings, according to a survey by investment platform Sharesies

There appears to be an appetite among KiwiSaver members to take home less pay now in order to boost their retirement savings, according to a survey by investment platform Sharesies.

Sharesies asked investors who are also enrolled with a KiwiSaver provider – any provider, not just Sharesies – how they would feel about a small drop in their pay for future gains.

“Almost 80% of people told us, ‘yeah, I get it, I have to put away more now than I want to have more later’ and I support them in that,” says Matt Macpherson, Sharesies’ GM of Super and Funds.

The response was the highest consensus among the questions asked in the survey, says Macpherson, but interestingly, just 20% of survey participants supported raising the minimum contribution rate.

At the same time, 67% of participants told Sharesies that the ideal contribution rate is higher than the current 3%, although the survey report commented that it could be an indication that people are unaware of the current settings, as when asked about lifting the minimum from 3% to 6%, there was 56% support for a significant increase to the minimum.

Matt Macpherson says the phrasing of the questions could explain the shift in sentiment, or just uncertainty around what future retirement will look like for people.

But he says it does demonstrate the importance of KiwiSaver members being actively engaged in their retirement planning and not waiting to be told what to save. 

“Instead of just outsourcing the thinking to whoever is setting KiwiSaver policy that election cycle and just relying on doing the minimum, make sure that works for you.

“Don't just blindly trust that 3% is the right thing for you, and don't wait for the government or something else to step in and tell you that it's not, because it's your retirement and a little bit of ownership here is what we're trying to encourage.”

With members seemingly interested in saving more, the next piece of the puzzle, says Macpherson, is finding out what business think.

“Employers contribute a lot to KiwiSaver, and if we assume how businesses feel about increasing those contributions, it might be better to just go and actually ask a whole lot of businesses as well and see how they feel, because I was really surprised at how many individuals were supportive of increasing their contributions.”

“Who knows? Maybe businesses are too, but we don't know that. We don't have that data.”

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Thirteen months after launch of its KiwiSaver offering, the wealth app this week celebrated the 10,000 member milestone for its scheme, which offers access to base funds managed by Milford, Pathfinder, Pie Funds and Smart, alongside individual company and ETF picks. The Sharesies investment platform has around 750,000 customers.

Sharesies’ GM of Super and Funds Matt Macpherson says customers’ desire for consolidation has been a major driver of the scheme’s growth, as it was with the banks in the early days of KiwiSaver.

“People wanted their KiwiSaver in the same place they’re logging on to do their other banking and it made a lot of sense for them, because they didn’t have to worry about another sign in, they didn’t have to worry about tracking it somewhere else,” he says.

“We’re actually seeing that working to support customers switching to us, they want to see all their investments in one spot.” 

However, it’s not just existing KiwiSaver investors the company is targeting, with around 10 percent of business coming in the form of customers new to KiwiSaver, says Macpherson. 

“We’re engaging people to get involved, maybe they’re in their mid-forties or fifties even, and they’re signing up because we’ve made it more convenient and an easy process.”

The ability to maximise US exposure appears to be another drawcard for investors, with most gravitating towards the US 500 in their individual picks. So much so, Sharesies is turning it into a base fund option for KiwiSaver investors.

Macpherson admits it’s been a more challenging road to market than the company expected, but says he hopes to see it continue to grow at a sustainable pace.

“We’ve got things like kids accounts we don’t currently support, our ambition is to try to complete the product, it’s probably about three quarters of the way there.”

KiwiSaver members will likely be keeping a closer eye on their balances as their pot grows but for most a straightforward management approach remains the best fit, says Milford Asset Management’s Head of KiwiSaver and Retail.

Reflecting on the evolution of KiwiSaver and recent innovation in the sector, Murray Harris tells Good Returns that it is only natural for savers to become more interested in their invested savings and how they’re managed as their balance grows larger.

“We've seen some very specialist emerging market funds, and I think for a small percentage of the KiwiSaver membership, they'll be interested in that and obviously cryptocurrency and Bitcoin has been an area people have got an interest in too.

“And we're seeing innovation in the product side, which is good to see as well.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

Those more interested in long-term investing and taking on more risk would likely continue to seek advice and look at whether a growth fund primarily in equities is a good solution, says Harris.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

“I think, as in all markets, you see innovation, some of it gets traction, some of it doesn't.

“But I think the core of the KiwiSaver market really is your traditional, diversified fund-type investor,” he says.

Receiving the right advice at the right time remains crucial for KiwiSaver members, says Harris.

“The experience in Australia was when super balances got to about the value of a new car, that's a lot of money, and people don't want to muck it up – it’s going to be their retirement.

“They want to make sure that they've set the right goal, they are aware of the risk profile, and they're in an appropriate fund and contributed enough.”

Staying ahead of the pack

Heading into 2025, Milford will work to maintain its position as one of the top performers in the market, says Harris. Growing competition in the KiwiSaver landscape and the maturing of investors has been beneficial for independent brands like Milford, allowing them to step out from the shadow cast by the major banks. 

“In the very early days, there was a large land grab by the banks, because they had great brands, and people recognised them and saw them as being a safe place to have their money.

“But I think as balances have grown and people's maturity has grown around KiwiSaver, they're starting to look outside the banks and the mainstream players and saying, hey, you know, who do I really want my money managed by? Are they experts in managing money? Are they providing great service? Do they have great tools and access to advice?

“And so I think that's why you're seeing, you know, when you look at the flow stats, money flowing to some of the smaller independently-owned providers.”

The KiwiSaver pot grew by $7 billion to $117.6 billion in the third quarter of this year with QuayStreet, Milford and Generate highlighted as some of the strong performers over the long term.

According to research firm Morningstar’s latest KiwiSaver survey, the third quarter saw a mixed performance across the various asset classes, with some benefiting from easing inflationary pressures and softer monetary policy. Others experienced headwinds from global economic uncertainties and domestic factors.

All multi-sector funds had a positive performance in Q3, with funds’ returns ranging from 2% to 5%.

“The Kernel balanced fund has performed quite strongly, Westpac had a bounceback quarter, they’ve been a bit sluggish over three to five years and that’s come through this quarter as well,” said Morningstar Asia Pacific Data Director Greg Bunkall.

“ANZ had a bounceback quarter as well, they performed in the top five this quarter, but the numbers between the best and worst aren’t that different this quarter.”

Some provider names were prominent over the 10-year time period, he said.

“Milford, Generate and QuayStreet tend to show up quite strongly in those numbers but there seems to be a bit of clustering at the moment.”

As for market share, ANZ still leads the pack with $21.8 billion funds, ASB moves back up to second this quarter, with Fisher Funds in third, then Westpac and Milford.

Of the default funds, Fisher Funds and Westpac topped the table with the best returns of the quarter. Most of the default funds achieved 16%+ returns for the year, compared to the average conservative fund which was around 11%.

“We continue to see the balanced over one-year performing strongly compared to conservative, which is positive because we did have that change a few years ago around default options, so people sitting in default options are having a better outcome,” Bunkall said.

“BNZ default over one-year is at 18.1%, Booster default is 18.2%, Simplicity 18.1% – they’re performing strongly especially in relation to where clients would’ve been if they’d been in conservative.”