KiwiSaver

KiwiSaver funds with allocations to defensive assets are starting to shine again, new data shows.

For a number of years now, aggressive and growth funds with heavy allocations to equities have been the star performers.

But the latest Morningstar survey, for the June quarter, showed more conservative options gaining ground amid international jitters.

Most KiwiSaver funds had a positive quarter.

Morningstar’s Australasia director of manager research ratings Kathryn Young said investors who were most exposed to defensive or domestic assets did best.

“Investors should, however, focus on ensuring that their KiwiSaver option’s asset allocation best fits their investment timeframe and risk profile.”

Average multisector category returns were all positive for the June quarter, ranging from 0.34% for the aggressive category to 1.57% for the conservative category.

Aggressive funds were flat on average over the year to June 30, 2016, while the conservative category gained 5.2%. Over longer periods, however, funds with greater equity risk have generally gained more.

Notable performers over the quarter included ASB KiwiSaver, whose growth and balanced options topped their respective peer groups.

The best performers in the multisector conservative category were Milford KiwiSaver Conservative (2.43%), followed by Fisher Conservative KiwiSaver (2.42%), and Aon KiwiSaver Russell Lifepoints Conservative (2.10%).

KiwiSaver assets on the Morningstar database grew to $33.40 billion at June 30, 2016 from $954.10 million at June 30, 2008. The industry remains highly-concentrated, the six largest KiwiSaver providers accounting for 85.9% of assets on Morningstar’s database

Financial advisers are being urged to give clients a reality check about what they really need in retirement.

An ANZ survey found most New Zealanders have lofty goals for their retirement – they want to own their own home, drive recent model cars and travel overseas.

More than a quarter plan to do house renovations in retirement and 41% expect they will buy new appliances. The same number said they had no intention to work past 65.

ANZ general manager funds and insurance Ana-Marie Lockyer said the survey found that 75% of people intended to fund their retirement through KiwiSaver.

“It’s great that so many New Zealanders have put their faith in KiwiSaver but it’s important this isn’t blind faith,” she said.

“The reality is that it costs a lot of money to cover daily expenses, run a car and maintain a home. For example, it costs about $4700 a year to run a car and $7000 a year to cover home repairs and maintenance.”

According to ANZ’s Retirement Savings Barometer most New Zealanders (54%) want their savings to generate more than $300 a week on top of national super.

“You’d need to save around $370,000 to allow you to withdraw $300 a week during retirement,” she said. That was based on a 25-year retirement.

“Many New Zealanders will fall well short of that based on current KiwiSaver balances and contribution rates.”

A 30-year-old with $10,000 in their KiwiSaver account today, earning $50,000 and contributing 3% of their salary, matched by their employer, would have around $190,000 saved by the time they’re 65.

A 45-year-old with $10,000 in their KiwiSaver account today, earning $50,000 and contributing 3% of their salary, matched by their employer, would have around $90,000 saved by the time they’re 65.

“While this is sobering information, you can take steps to make sure you save enough for your retirement,” she said. “The first step is to take a bit of a reality check on whether you’re contributing enough to meet your goals.”

Lockyer said KiwiSaver members could be directed to check out online calculators as a first step to work out what they were on the path to achieve.

A growing number of high-net-worth individuals are looking to KiwiSaver as a way to manage their retirement income, AMP’s general manager of insurance and investments says.

AMP is introducing 16 new funds to its current 11 KiwiSaver options, which will be made available via an online platform. 

Therese Singleton said it was the next best thing to a wrap platform-style KiwiSaver solution, which is not allowed under current legislation.

She said it could be used by DIY investors who wanted to manage their money themselves, or financial advisers who could use it to help their clients. “They can pick and choose what they like within an online environment. We’re tying to make KiwiSaver as all-encompassing and competitive as we can get it for advisers as well as direct investors.”

Singleton said there had been a noticeable increase in demand from high-net-worth people who wanted sophisticated KiwiSaver solutions. It was still a small percentage of the market, she said, but was growing. 

“Typically high-net-worth or sophisticated investors want more control around where they invest their funds and in time it will position us for the equivalent of a wrap offering in KiwiSaver.”

KiwiSaver was starting to stand out as a retirement income option for those aged over 65 because of its comparatively low fees, she said.  AMP is to start offering its sister company AMP Capital’s retirement income fund as a KiwiSaver option.

“People are looking at low term deposit rates and looking for income for life. But with low interest rates for the foreseeable future, people who might not have thought of KiwiSaver as a solution are thinking it’s a good product,” Singleton said.

Singleton said savvy advisers should be tapping into the KiwiSaver market because as balances grew, so too would their books. 

AMP had dealt with at lest two clients with more than $10 million to invest, who wanted to use KiwiSaver to cater for their retirement needs.

Advisers have an opportunity to encourage people to use their KiwiSaver statements to work out whether they are on track for retirement, although few of them seem to be taking it, the Financial Markets Authority says.

It has released the results of a new survey, which showed 21% of KiwiSaver members had read their provider’s annual statement thoroughly. Another 58% had looked briefly at it.
Only 23% had looked to see whether they were on track to achieve the outcome they wanted.

Paul Gregory, FMA director of external communications and investor capability, said that the annual statement should be an important trigger for members to think about what they were saving and investing for. “When this arrives through your letterbox, or in your email, it’s a great opportunity to check in with your goals. And, if you’re not happy, to check in with your KiwiSaver provider.”

People should consider the income they wanted in retirement, and the amount they would need to save to get there, whether they were on track and, if not, what they could do about it.

Of those who checked to see if they were on track, only 15% said they had talked to a financial adviser, compared to 43% who had used an online calculator.

Gregory said advisers could use the annual statements as an opportunity to engage clients and make sure they had a plan.

He said there was room for improvement in the statements from providers.

Almost three-quarters of respondents said they wanted to see information about the lump sum they were on track to get, 62% wanted to see what level of income that sum would deliver and 37% said they wanted to see their fees represented as a dollar amount. At the moment, providers often only give details of the administration fee, not the management component.

Gregory said that was something advisers could encourage their clients to ask their providers for.

The Ministry of Business Innovation and Employment is currently working with the FMA and the Commission for Financial Capability to review the format and content of the KiwiSaver annual statement to consider ways to improve the information provided. The results of the FMA survey will be taken into account.

Respondents said high fees (43%), a fund losing money (36%) and another provider achieving better returns (36%) were the things that were most likely to prompt them to change their KiwiSaver provider. Only 11% said they would switch because another provider asked them to join their scheme.