KiwiSaver

Many KiwiSaver investors are choosing to leave schemes run by their banks, new research shows.

For the year ended March 31, the five major banks collectively had 28,139 members transfer out of their KiwiSaver funds, which represented 58.7% of the number that transferred in.

“The negative association between fund and member flows and the KiwiSaver provider being a bank was a real surprise,” said Dr Claire Matthews, Massey’s director of financial planning.

It follows her research reported earlier this month by Good Returns, which suggested that being able to see a KiwiSaver balance online was both a benefit and a drawback.

She said: “This might mean that members are constantly monitoring their account and their funds’performance – and choosing to move when performance is poor.”

Dr Matthews said the research showed the immaturity of investors in KiwiSaver and the need for education and advice to ensure they were making appropriate investment decisions.

“While investors do appear to be chasing returns and avoiding fees, that’s not always the best approach to a long-term investment,” she said. “Both returns and fees are important but it’s a sign of an immature market when investors chase historic returns with an expectation that they provide some indication of future returns, which of course they don’t.”

AMP has implemented changes to the make-up of its KiwiSaver funds in response to a review of its strategic asset allocation.

The AMP KiwiSaver Scheme Default Fund will reduce its cash allocation and increase its holdings in New Zealand and global bonds.

And AMP KiwiSaver Scheme non-Default members will now have a dedicated stake in airports, railways, and pipelines around the world.

“It also means their investments are more widely diversified, which is a point of difference from those KiwiSaver schemes that are heavily exposed to the New Zealand market,” said Jack Regan, Managing Director, AMP New Zealand.

AMP announced in February that it was transferring its AMP Wealth KiwiSaver Scheme members to the AMP KiwiSaver scheme, which would utilise the strengths of both schemes.

The Financial Markets Authority will decide whether to approve the move in August.

Regan said AMP Wealth KiwiSaver members would be given more information next month.

AMP has more than 260,000 KiwiSaver Scheme members across its two KiwiSaver schemes, and 16 per cent market share of KiwiSaver funds under management.

More than 40% of people who want to have retirement income on top of NZ Super want at least $500 extra a week, ANZ’s latest Retirement Savings Confidence Barometer shows.

For 20 years, that would require a lump sum at retirement of about $400,000.

At the moment, more than half of pensioners survive solely on Government assistance. Of those receiving some income on top of that, another half receive $100 a week or less.

But ANZ’s survey showed just 5% of respondents who are currently working intended to live on the pension alone. And the survey showed that 48% of people who were saving for retirement, planning to save or expected another source of income in retirement were confident of reaching their goals.

It showed that 51% of regular KiwiSaver contributors were confident they would reach their goals. The most confident were men and those with higher incomes.

Among those who had stopped contributing, that number fell to 29%. Just under half of those on a contributions holiday were confident.

An ANZ spokesman said it did not seem KiwiSavers were stopping contributions to focus on other investments. Most of those who stopped were people who cited KiwiSaver as their primary retirement savings vehicle.

ANZ wealth managing director John Body said the confidence gap was concerning. “It’s encouraging to see KiwiSaver appears to be making a difference to people’s confidence about achieving their preferred retirement income.”

Just under 65% of people surveyed were saving for retirement. Almost a third of those not saving expected income from other sources, such as selling a business.

Body said a gap in savings could make a big difference. “If you are in your 20s or 30s and take a five-year gap from paying into KiwiSaver, then the impact on your final lump sum at retirement can run into tens of thousands of dollars.”

None of the KiwiSaver funds monitored by Morningstar have experienced negative returns over any of the one-, three- or five-year monitoring periods, which co-head of fund research Chris Douglas says has come as a pleasant surprise.

Morningstar yesterday released its KiwiSaver Performance Survey to March 31.

Douglas said the first quarter of the year had been a busy one for KiwiSaver providers, with several closing funds to new investment and BNZ joining the market.

Douglas said the latest return pattern was much as most people would expect. “When equity markets are strong, balanced growth and aggressive funds do better.”

Funds with an exposure to shares and listed property have done well while fixed interest returns have been less impressive. Milford’s allocation to shares pushed it to the top of the conservative and balanced funds categories.

AMP, ANZ and SIL had strong results across a number of categories.  Fisher Funds, Fidelity KiwiSaver and Brook KiwiSaver performed strongly across the growth and aggressive multi-sector categories.

Milford’s Active Growth KiwiSaver posted a 13.65% return per annum over five years and was the top performer when the data was taken since inception.

Of the default schemes, OnePath’s conservative scheme is offering the best returns of 6.3% per annum over five years and 8.5% on a one-year basis.

KiwiSaver assets on the Morningstar database have grown from $954.1 million in 2008 to $14.48 billion at March 31.

Douglas was optimistic about the coming year, although he said there was always the possibility of volatility on the horizon.

He pointed to increased investment in high-yielding shares, of which the New Zealand market has more than its fair share. He said that was appealing to New Zealand and foreign investors and could keep the sharemarket buoyant for some time to come.

“But like any market we are prone to offshore jitters. We’re not out of the woods by any measure yet.”