KiwiSaver

Generate KiwiSaver has made a second investment into social housing.

Generate KiwiSaver Scheme has made a $13.7 million impact investment into the Te Puna Hapori – Verdi Social Housing Bond.

The deal provides funding for two new social housing projects, which will house 39 families (at least 78 people) currently living in sub-standard accommodation.

The lessees, Emerge Aotearoa and the Salvation Army, will each lease one of the developments and offer them as safe and affordable housing for families who cannot afford their own homes.

The leases are further underpinned by contracts between the lessees and the Ministry of Housing and Urban Development (MHUD).

The deal is a win for both the future housing tenants and members of Generate KiwiSaver Scheme, delivering investors both a sound investment return and social impact. The bond is split
into two tranches, each with fixed interest returns over at least five years backed by a stable profile of payments from long-term leases.

“Responsible investment is one of our core values at Generate and this investment really ticked all the boxes for us,” Generate fixed income portfolio manager Ayrton Oliver says.

“The Te Puna Hapori – Verdi Social Housing Bond, allows us to use our investing power to create positive change in our community, while still delivering attractive returns for our members,” he said.

The bond is the first impact investment delivered in New Zealand by Brightlight, an impact investment management firm committed to transforming lives through investments across Australia and New Zealand.

Impact Investing is nothing new to Generate. In 2020 Generate was the first KiwiSaver scheme to invest in social housing via a $21 million investment into Salvation Army community bonds, which
helped build 118 new warm, dry, affordable community houses across three locations.

Simplicity has dropped its membership fees from all of its products effective immediately.

The nonprofit KiwiSaver provider says that from today all of its members will no longer pay membership fees on any Simplicity funds.

Previously, adult members paid a $20 a year membership fee.

Managing director Sam Stubbs has been scathing in his criticism of industry fees, which he says remain far too high.

Over the past five years, the nonprofit has reduced its membership fee four times, including this recent move.

In contrast, the latest Morningstar KiwiSaver survey shows a median annual membership fee of $23 for growth and balanced funds and $9 for conservative funds.

Simplicity’s management fee remains in place at 0.31% per annum for all of its growth, balanced and conservative KiwiSaver and investment funds and 0.10% per annum for New Zealand share and bond funds.

The latest Morningstar survey shows mean management fee charges of 1.18% for KiwiSaver growth funds, 1.03% for balanced funds, and 0.68% for conservative funds.

Stubbs says KiwiSaver fees in 2020 were $650 million, a massive number given there are no capital requirements or any need for additional bank branches.

"Average management fees for KiwiSaver funds are two to four times higher than a not-for-profit provider like Simplicity.

"It’s party time for banks and fund managers, but a rip off for hard working New Zealanders."

He says 2021 has been a banner year for Simplicity, with fast growth, becoming a default KiwiSaver provider and winning some key customer satisfaction awards.

Simplicity has over $4 billion of funds under management and over 76,000 members in its KiwiSaver and investment funds.

Good Returns has gathered information from the six KiwiSaver default fund providers – everything from fees to customer support and how those funds will be invested. 

KIWI WEALTH: Kiwi Wealth chief executive Rhiannon McKinnon

The Kiwi Wealth KiwiSaver Default Scheme

Key features:

– A balanced product targeting 60% equities and 40% fixed income with a mix of New Zealand and global assets
– Predominantly passive but also includes active management

Fees:

– 0.37% per annum

Will any "transition fees" be charged?

– Kiwi Wealth is bearing the sell spread costs for our current default members being switched to our new default fund. As such we will only be charging the buy spread, for both our current default members and incoming default members, which will be around 0.12%.

– This is to reflect the cost of buying and selling underlying investments held by a fund and we do not make a profit from buy spreads. Information about buy spreads is included in our planned default member communications programme.

How many of your default members will move to the new default fund?

– Approximately 20,000 members

How do you plan to support and inform your new members?

– We have increased our headcount in our customer service team to assist our new members. We also rely on our online portal to assist our members and have a marketing tool that will provide targeted information to members.

How do you plan on offering financial advice, if any, to your new members?

– Our online portal has the robo-advice function which will assist our members to find the fund right for them. In addition, we also have advisers who can provide personalised support.

What support/education do you offer for first home buyers?

– We provide guides on our website to explain every step to achieving the goal of owning a first home.

Any investments into non-ESG or SRI funds?

– No, our ESG approach and Responsible Investment Policy applies across our KiwiSaver portfolio. All our funds are certified by the Responsible Investment Association Australasia (RIAA), except for the new default fund which we are currently going through the process to get RIAA certified.

BOOSTER: via a media statement

The Booster Default Saver Fund

Key features:

– A balanced fund targetting growth assets (shares and property) of 55% and income assets (bonds and cash) of 45%.

– To construct a default balanced fund portfolio to meet the cost minimisation objectives of the default KiwiSaver mandate, we apply active strategic and tactical asset allocation strategies while utilising a selection of underlying passive sector funds where appropriate to complement our inhouse management capability in NZ and Australian securities as well as our inhouse ESG overlays.

Fees:

– 0.35% per annum

Will any "transition fees" be charged?

– No. However, there are costs associated with implementing the new investments strategy which are no different to any portfolio strategy change or adjustments in any other fund portfolio.

– We minimised the costs involved as much as possible for members by synergising and netting any changes across all the other portfolios under management, including non-KiwiSaver funds.

– The actual figure is not yet known but will be approximately $0.05 for every $100 a member has invested.

How many of your default members will move to the new default fund?

– 16,399 members as of November 25

How do you plan to support and inform your new members?

– Booster pride ourselves in providing high levels of both personalised support and a leading digital experience.

– All members will be welcomed personally by one of our team with a call.

– We check they’re in the right fund for their saving goals and answer any questions they might have about KiwiSaver.

– Ongoing support and personal check-ins, ensuring they continue to make the most of their KiwiSaver account and keep it set up appropriately for their goals and situation.

How do you plan on offering financial advice, if any, to your new members?

– Members can get KiwiSaver specific advice on the default fund from our in-house Booster advisers.

– If members require further more complex personalised advice we will refer them to a financial adviser.

What support/education do you offer for first home buyers?

– A specific programme of communications and engagement opportunities that offer support and education to members when they reach certain milestones.

– For members who become eligible for a first-home deposit withdrawal, we’ll contact them and offer guidance to help members build up their deposit.

– Encourage members to use our free budgeting app, mybudgetpal, to help with budgeting and saving goals.

– Our blog has a range of educational articles on KiwiSaver, investing, and budgeting, along with real-life examples of Booster members who have purchased their first home.

Any investments into non-ESG or SRI funds?

– The fund will exclude investments in fossil fuel producers and controversial weapons companies consistent with the MBIE requirements.

– Booster offers a separate range of socially responsible funds that apply a wider range of values-based exclusions.

SIMPLICITY: Director of sales and strategy, Ian Miller

The Simplicity Default Fund

Key features:

– As per the mandate, within the objectives established as part of the Instrument of Appointment as a diversified balanced fund.

– A low-cost passive manager and we give 15% of our fees to the Simplicity Charitable Trust.

Fees:
– 0.31% per annum

Will any "transition fees" be charged?
– No

How do you plan to support and inform your new members?

– Enrolment and engagement are at the front of our delivery, in the first instance, they need to get curious about their account and how to access their information.

– Are they in the right fund, are they saving enough, where can they access new information?

– The engagement communications are an excellent initiative and will help build confidence for KiwiSaver members.

– Our education classrooms remain popular. Our online portal has tools and information which will help members seek the information they are looking for.

How do you plan on offering financial advice, if any, to your new members?

– We do not provide personalised financial advice.

What support/education do you offer for first home buyers?

– We have a first home buyers education classroom which is very popular, and first home withdrawal requests are generated daily on request for those seeking to secure finance.

– Our floating home rate for first home buyers is very attractive and the lending team are always on hand to assist buyers with their mortgage application.

Any investments into non-ESG or SRI funds?

– All our funds carry the same ESG screens and we do not have a non ESG fund.

WESTPAC: via media statement.

The Westpac KiwiSaver Scheme Default Balanced Fund

Key features:

– managed by BT Funds Management.

– Has equal allocations to growth and income assets and a minimum recommended investment timeframe of six years.

– It aims to provide members with moderate-to-medium returns over the medium-to-long term.

– Our investment philosophy is to apply mainly actively-managed investment approaches which aim to take advantage of attractive investment opportunities, blended with index-tracking investment strategies to help keep fees low.

How many of your default members will move to the new default fund?

– Approximately 23,000 existing Westpac KiwiSaver Scheme members will switch to the Default Balanced Fund

Fees:
– 0.40% per annum

Will any "transition fees" be charged?

– No transaction charges or fees for anyone moving to the Default Balanced Fund, including those from other providers.

How do you plan to support and inform your new members?

– Members will receive communications encouraging them to make a fund choice through our Fund Chooser.

– If members want further financial advice that takes their personal circumstances into account, Westpac financial advisers are available free of charge.

Any investments into non-ESG or SRI funds?

– Any investment into a third party fund must be in accordance with our Sustainable Investment Policy.

– Our Sustainable Investment Policy applies to all Westpac KiwiSaver Scheme funds and their underlying investments.

SMARTSHARES: via media statement.

The SuperLife Default Fund

Key features:

– The fund is invested in a selection of Smartshares ETFs consistent with the fund’s investment objectives.

– KiwiSavers can stay in the default fund but can also move their balance free of charge to any of our 43 investment options.

– A diversified balanced fund with a target weighting of 46% to income assets, such as cash and bonds, and 54% to growth assets, such as equities and property.

– The fund combines active management of asset class allocations with passive management of underlying investments.

Fees:

– 0.20% per annum.

Will any "transition fees" be charged?

– Smartshares will charge an administration fee to members investing outside of the default fund.

– The costs of transferring will be covered by the members moving into our default fund.

– We expect any costs will be outweighed by the extra savings members will receive from being a member of what is currently the lowest-priced KiwiSaver default fund.

How do you plan to support and inform your new members?

– Smartshares has a strong focus on transparency, which has shaped our engaging multi-channel communications and support programme for members.

– Communication starts with new members as soon as they join and continues at regular intervals and key milestones 

– At any point, members can also reach out to our team directly on the phone, by email, or using the live chat function on our website.

How do you plan on offering financial advice, if any, to your new members?

– Smartshares holds a transitional Financial Advice Provider licence.

– Our new default members will have immediate access to digital advice.

– Smartshares also has a number of Nominated Representatives who can also provide simple financial advice to our members.

– For members needing more holistic advice services, we have formal relationships with a number of financial advisers.

What support/education do you offer for first home buyers?

– They are supported by our team in Auckland who start this journey using an easy-to-follow process and are available to talk through any questions or provide additional information.

Any investments into non-ESG or SRI funds?

– The fund is invested into the Smartshares Global Equity ESG ETF, which aims to track the MSCI World ex Australia Custom ESG Leaders Index.

– The remaining underlying exposures in Smartshares ETF do not require any ESG exclusions.

BNZ: via media statement.

The BNZ KiwiSaver Scheme Default Fund

Key features:

– Balanced asset allocation, a low percentage-based management fee and no fixed fees.

Fees:

-0.35% per annum.

Will any "transition fees" be charged?

– No, we do not charge a fee for transitioning members.

– However, our scheme does have buy/sell spreads in place. Those members purchasing or selling units in a fund will incur a spread cost.

– The buy spread for the BNZ KiwiSaver Scheme Default Fund on 1 December when the fund opens is 0.0860%.

– For those default members switching from the Conservative Fund to the Default Fund, we are applying a special price, which takes into consideration assets that the member will continue to hold.

– We estimate the cost of this switch (buy and sell) will be around 0.065%.

How many of your default members will move to the new default fund?

– Approximately 24,000 default members in our Conservative Fund

How do you plan to support and inform your new members?

– We have designed a comprehensive member engagement programme for our KiwiSaver members.

– This programme has a particular focus on important stages of their lives and Kiwisaver journey to help make sure they’re making the right decisions for their needs.

– We contact members when they join, if they make a withdrawal for their first home, when they’re 10 years out from retirement, and other key milestones along the way.

– Regular newsletters that include content aimed at boosting their financial capability.

How do you plan on offering financial advice, if any, to your new members?

– BNZ has a powerful digital tool called KiwiSaver Navigator that guides staff members through a discussion with KiwiSaver customers.

– This tool allows customers to see the difference contribution rates and fund choices can make to their savings.

– It also provides a picture of what the decumulation phase of the KiwiSaver journey might look like for the customer.

– BNZ also offers fund finder tools to all current and potential members through our website.

What support/education do you offer for first home buyers?

– As part of an enhanced member engagement programme members will be provided with the information they need to be informed first home buyers.

– Contact KiwiSaver members when they are approaching eligibility to make a first home withdrawal.

– Contact them after the withdrawal.

Any investments into non-ESG or SRI funds?

– BNZ doesn’t invest in companies that own proven or probable fossil fuel reserves, or companies that earn more than 10% of their revenue from the production and distribution of adult entertainment, or gambling operations, or supporting products and services.

– Not investing in companies that are involved in manufacturing cluster munitions, landmines, nuclear weapons, and tobacco.

What's value for money with KiwiSaver? Former Financial Markets Authority chief executive Rob Everett provides answers in this Good Returns TV interview.  [Including Podcast]

Rob Everett admits working out what is value for money “is a difficult topic.”

“What we were trying to do with value for money is acknowledge that it's not all about fees.”

He says, despite claims from the industry, that the FMA isn’t trying to drive every KiwiSaver provider to a low cost, passive index hugging model.

That would be a poor result for the industry and members.

See Podcast below

“We were also trying to acknowledge that for a lot of people, the difference between 50 basis points and 60 basis points or 75 basis points, it's not registering in their decision making.

“A whole bunch of other things are registering in their decision making, and sometimes it's been a challenge to work out what.”

Everett says increasingly, it's about what funds are invested in, what disclosures they provide members, the data the schemes give members and transparency.

“Value for money is partly about fees and returns. But…not all investors by any stretch of the imagination.”

He says at the moment the driving force is climate change and ESG factors, so now the FMA is worrying about greenwashing.

“Value for money was an attempt to say, we're frustrated about fees, and so we are going to push hard on fees, but it's not only about fees. And your value for money may be different from mine.”

While the FMA can’t regulate KiwiSaver fees, Everett would be wary going down that path.

“I'd be wary because I don't know we'd be any better at setting fees than anybody else. And actually setting fees, I think, is a slightly dangerous place to be.

The FMA has not pushed to get powers to regulate fees.

“What we've done instead is make a lot of noise. We're not quite sure what level the fees should be, but we're pretty sure they should be lower than where they are.

“And actually, the government took the same approach during the default provider review, so there was some commonality of view there.

“It's frustrating sometimes to push at something where you actually don't have the ability to say exactly what you think good looks like, but we have seen fees start to move. So I think the noise has had some impact at least.”

Everett says since the FMA started making noises some schemes had abandoning administration fee or lowered management fees.

“We have seen movements down by some of the bigger players. So, I think we've had an impact, but so have the low cost providers.”

Everett: says the FMA’s view is that every fund does not have to have the same fee, “or that even every fund has to have a low fee.”

Where a fund is charging a higher fee it needs to explain why.

“Some of the better performing funds after fees, have been reasonably expensive. So, we're not saying you can't charge high fees, but what we're saying is, if you've got a passive low cost that's got an index hugging approach, and you're not delivering spectacular returns, why are your fees at the top end of the range? And maybe there's a good reason.

Everett questions whether banks should have been able to get away with th big KiwiSaver land grab in the early days of the scheme’s launch.

He says” I don't know at the time that it was right, but one of the impacts of leaving it there for so long was that you built up these enormous balances of funds under management and collections of customers in the big organisations that didn't seem sufficiently incentivised to be creative and innovative.”

“I do think when the government did its default provider review, they seemed to have been looking for a better balance between small and more innovative players and the bigger players that have the resource.

“I suspect at the time, I may be wrong, there was a sense these players have the experience and the resource and the technology to get this thing off the ground.

“I think it's a shame given the markets we've been in. It took such a long period before it actually got recast a bit. But I think it's in a more balanced shape now, I would say, at least at the default provider level.