KiwiSaver rides the waves

KiwiSaver funds continue to ride the wave of buoyant stock markets with all funds making positive returns to the quarter ending June 30.

According to the latest Morningstar quarterly KiwiSaver Survey released this week, all multisector KiwiSaver funds made positive returns with average category returns ranging from 1.6% for the conservative category and up to 5.8% for the aggressive category.

Morningstar's Asia-Pacific director of manager research Tim Murphy says total KiwiSaver assets continue to grow and are close to reaching $83 billion.

Murphy says Morningstar agrees with the Financial Markets Authority's recent guidance to KiwiSaver providers on the inappropriateness of marketing shorter-term periods, like 12-month returns, as a means of attracting new prospective investors.

"And as we have repeatedly reiterated every time we publish our quarterly KiwiSaver Survey, 'it is most appropriate to evaluate performance of a KiwiSaver scheme by studying its long-term returns'."

Murphy says worldwide equity markets generally made positive returns over the June quarter, as economies continue to open and recover, vaccine rollouts expand and more people return to the workplace, against this backdrop the MSCI World Index was up 8.0% in NZD.

The US market ended the quarter up 8.6% and almost all sectors made positive gains, led by real estate and technology sectors.

"KiwiSaver funds generally reflected the underlying market conditions experienced over the June quarter with all multisector funds posting positive returns," says Murphy.

"Funds with larger exposures to international growth assets generally outperformed over the three-month period.

"Top performers over the quarter against their peer group includes ANZ Default Conservative 2.3% (Multisector Conservative), OneAnswer Conservative Balanced 3.0% (Multisector Moderate), ASB Positive Impact 4.9% (Multisector Balanced), AMP ANZ Growth 5.9% (Multisector Growth), and Milford Aggressive 7.8% (Multisector Aggressive)."

Over 10 years, the growth category average has given investors an annualised return of 10.5%, followed by Aggressive (10.3%), Balanced (8.7%), Moderate (6.6%), and Conservative (5.9%)

KiwiSaver assets on the Morningstar database sit at more than $82.9 billion as of June 30, up from $76.3 billion on December 31, 2020.

ANZ leads the market share with more than $18.5 billion. ASB is in second position, with a market share of 17.1%.

Westpac holds third spot ahead of Fisher Funds, while AMP sits in fifth.

The six largest KiwiSaver providers account for approximately 74% of assets on the Morningstar database.

Kiwis concerned about retirement savings

More than 60% of New Zealanders are worried they will not have enough money to support themselves in their retirement, a new study shows.

According to research undertaken by the Financial Services Council (FSC) – KiwiSaver at a Crossroads – almost three-quarters of those surveyed would also like KiwiSaver to be compulsory and support an increase in contribution rates.

However, with the average KiwiSaver balance sitting at just over $25,000 many Kiwis will find it difficult to retire comfortably.

As KiwiSaver celebrates its 14th birthday this month, the FSC has released new research looking at what New Zealanders think about the scheme that has around $82 billion invested, the role it plays in their retirement preparedness, and where it needs to head in the future.

“This research shows that New Zealanders overwhelmingly support KiwiSaver and want its role to be increased”, says FSC chief executive Richard Klipin.

“With 78% supporting compulsion and almost three quarters (73%) supporting an increase in contribution rates, there is widespread public support for action in both areas.

“As an additional indicator of support almost 80% of respondents thought they were getting value for money for the KiwiSaver fees they pay."

Klipin says the research also found New Zealanders are deeply worried about not having enough savings for their retirement.

“64% of New Zealanders, which represents 2.5 million people, are worried they won’t have enough to retire comfortably or afford where they want to live.

“With the average KiwiSaver balance just over $25,000, there’s a yawning gap between what New Zealanders have in their KiwiSaver and what they need to save," he says.

“That means most Kiwis will fall short of being able to fund a modest retirement, let alone a comfortable one."

Klipin says when you consider property ownership is on the decline and many younger Kiwis probably won't own their own homes by retirement, $25,000 is not going to be enough.

“With 17% of New Zealanders not contributing to KiwiSaver at all and more than 30% contributing only the minimum 3% there’s no doubt that we need to do more to help New Zealanders build their KiwiSaver balances,” says Klipin.

Financial literacy was also an issue with a quarter of survey respondents saying they didn't know how much they needed in retirement, and 22% didn't know the balance of their KiwiSaver.

Klipin says that while overall, the findings show New Zealanders strongly support changes to KiwiSaver, a wider discussion is needed and there is a trade-off between the pace of change and affordability.

“Implementing changes as part of a phased approach would help ensure that vulnerable customers are not thrown in the deep end right away and have time to prepare for any significant changes to the KiwiSaver scheme.

“KiwiSaver has made good progress over its first 14 years, and we hope this research illuminates some of the issues and the possibilities for a way forward.

“Getting these issues right is not easy and we don’t claim to have the answers."

The research was conducted online between April 15 and 26 by CoreData and collected a total of 2,035 valid responses. It is representative of the New Zealand consumer population in terms of age, gender and income based on the latest Stats NZ data.

Most Kiwis support compulsory KiwiSaver

About 78% of New Zealanders support making KiwiSaver compulsory and 73% support an increase in contribution rates, according to a survey commissioned by the Financial Services Council.

The council, whose members are KiwiSaver providers, said the survey of 2,000 people was conducted by CoreData.

"As an additional indicator of support, over 75% of respondents thought they were getting value for money for the KiwiSaver fees they pay," said FSC chief executive Richard Klipin.

"The research also found that New Zealanders are deeply worried about not having enough savings for their retirement," Klipin said.

The average KiwiSaver balance of just over $25,000 means "there's a yawning gap between what New Zealanders have in their KiwiSaver and what they need to save. That means most Kiwis will fall short of being able to fund a modest retirement, let alone a comfortable one", he said.

About 17% of New Zealanders are not contributing to KiwiSaver at all and more than 30% of those who are contributing pay in the minimum 3% of earnings.

All New Zealanders over age 65 are entitled to government superannuation which is currently $506.64 a week before tax for a single person and $768.92 for a couple.

ASB KiwiSaver comes out poorly in survey

ASB KiwiSaver ranks last for customer satisfaction, Consumer NZ survey finds.

Just 43% of ASB customers were happy with the service they were getting. Consumer NZ chief executive Jon Duffy said ASB’s score was significantly below the market average of 55%.

“ASB also scored below average on all our key satisfaction measures. Just 37% of customers thought ASB did a good job keeping them up to date about their investment, compared with the industry average of 48%,” Duffy said.

ANZ, the biggest KiwiSaver provider, also scored significantly below average for overall satisfaction with a rating of 50%.

“The best performers this year were streets ahead. Milford Funds came out on top with 85% overall satisfaction. It scored particularly well for access to account information (93%) and keeping customers updated about their investment (84%).”

Simplicity was second placed (74%) and Aon New Zealand third (73%). 

"Our results show a big difference between the best and worst performers when it comes to keeping customers informed about what’s happening with their money," Duffy said.

Across the market, six out of 10 Kiwis didn’t know how their fund was faring compared with others. Fee transparency was also a big issue. Seventy percent didn’t know how much they paid in fees. The amount KiwiSaver providers earn from fees has continued to rise, totaling $539 million in 2020.

The survey also showed many Kiwis want to know their money is invested responsibly.

Almost half (48%) said they wanted a fund that provides a good return and invests responsibly – both were equally important. A further 13% ranked responsible investment as the priority.

One in three KiwiSavers said they would be very concerned if their money was invested in oil and gas exploration. However, 68% were unsure whether their provider invested in this area.

Changes announced by the government mean that from December default KiwiSaver providers will no longer be able to invest in fossil fuels. They will also be required to publish a responsible investment policy on their website.

Other changes to default schemes will see a drop in charges, a move which should put pressure on industry competitors to review their fees, Duffy said.