KiwiSaver

Bumping up KiwiSaver contributions and introducing a carer’s savings credit for those with young children are among the improvement measures identified in a new report benchmarking New Zealand against other countries’ pension systems.

The Mercer CFA Institute Global Pension Index compares 48 retirement income systems based on their adequacy, sustainability and integrity. New Zealand is ranked 14 out of 48 overall, landing in the top 20 for both sustainability and integrity, but slipped from 25th last year to 28th in 2024 for adequacy. New Zealand’s placing earns it a “B” grade.

“KiwiSaver is the fastest growing invested asset in the country, having surpassed $100 billion NZD,” said Mercer New Zealand’s Consumer Wealth Leader Sarah Whitelock. 

“As the KiwiSaver system matures, and we are starting to see the benefits play out for retirees through a supplemented retirement income, we now need to ensure that savers of all ages understand the importance of retirement planning and decumulation strategies.”

A focus on ensuring people understand retirement income is the core purpose of KiwiSaver would help improve the system, as well as further education for savers on how to turn their nest egg into an income during retirement.

Other improvements to the system are outlined in the report and include increasing the level, coverage and tax efficiency of KiwiSaver contributions, encouraging households to save more money and reduce debt levels and introducing a savings credit or contribution for carers of young children, which is not contingent on them making their own contribution.

Topping the global pension rankings was the Netherlands, followed by Iceland, then Denmark.

Rise of defined contribution plans adds complexity

At a global level, the report acknowledges retirement systems are increasingly moving away from defined benefit plans in favour of defined contribution plans, like KiwiSaver.

CFA and CFA Institute’s President and CEO Margarent Franklin said the shift creates challenges to financial planning, and future retirees will be the ones forced to deal with them. 

“DC plans require individuals to make complex financial planning decisions that may significantly impact their financial circumstances, and yet many individuals are not well prepared to manage the required decisions.”

“The Index serves as an important reminder of the gaps that remain in providing long-term financial security and advice for individuals. The need for credentialed and ethical financial advisors once again stands out, and that’s why we have launched new initiatives in the private wealth space to meet this gap,” she said.

Generate KiwiSaver makes another investment into private equity.

Generate KiwiSaver Scheme is committed US$25 million in to Australian-based HEAL Partners Fund II which specialises in health and education investments.

The fund  isca late-stage growth and follow-on fund, and has raised A$200 million and is targeting A$350million to A$500 million in commitments.

Generate has now committed more than $120 million into private equity and venture capital funds over two years after having previously committed capital locally into Movac and Icehouse Ventures’ growth funds and also into a US private equity infrastructure fund.

The HEAL fund has made completed two investments, and is finalising two more.

The investments includes $52 million in Removery, the world’s leading tattoo removal platform and only tattoo-removal platform of scale globally, and a $30 million investment in The Fertility Partners, Canada’s largest IVF clinical network and one of the largest fertility platforms in North America. 

The fund is targeting a portfolio of around eight investments in total.

Generate Investment Management co-Founder and chief investment officer, Sam Goldwater, has been appointed to the Fund II Limited Partner Advisory Committee. He joins existing members including Rick Cohen, representative of Elliott Investment Management L.P. The committee is made up of investors in fund who are independent of HEAL and not investors in Fund I.

“We were impressed with the calibre of the HEAL team, were attracted to the differentiated deal flow and the high growth sectors which the fund is investing in," Goldwater says. "The fund’s follow-on approach also provides us with a high degree of visibility to where funds will likely be deployed.”

Milford, Generate and Simplicity KiwiSaver have each enjoyed massive growth in assets under management over the last five years.

In the five years to March 2024, Milford added around $6.5 billion in assets with a 40% per annum growth rate, while Generate and Simplicity also enjoyed high growth rates of 35% and 47% respectively, according to analysis by Melville Jessup Weaver.

While Australian bank-owned providers saw significant increase in assets (ranging from around $3.5b  for BNZ to almost $7b for ANZ), this came at relatively low rates of growth.

For the financial year to March 2024 and allowing for aggregate ownership of multiple schemes by ANZ, Fisher Funds and NZX; ANZ retained great market share at 19%. Below that several positions were traded over the year with Fisher Funds leapfrogging ASB for second place, Milford passing AMP for fifth and Generate pipping Booster for eighth.

However, KiwiSaver remained a very skewed market with the largest three owners accounting for about 50% of members, and the largest ten accounting for about 90% of members.

Among the smaller providers, big movers were Sharesies (up seven spots) and Kernel (up four). In terms of absolute growth, Milford, Fisher Funds, ANZ and ASB each increased by over $2 billion AUM. When considering the percentage gains, the leaders were Sharesies (which started from a near zero base), Kernel, Kōura, Aurora and KiwiWRAP – each of which more than doubled its assets.

In terms of membership growth, the biggest winners for the year in absolute terms were Milford, Generate and Simplicity. At the smaller end of town, Sharesies, Kernel, Kōura and Aurora all saw substantial growth from  lower bases.

This year saw little change in the market make-up, with no new entrants. However, five schemes have been rebranded in recent months: Kiwi Wealth to the Fisher Funds Plan, Nikko to GoalsGetter, Juno to Pie, Select to JMI Wealth, and Lifestages to SBS.

The number of default members rose slightly from 325,000 to 341,000 but as at 31 March 2024, only about 10% of KiwiSaver members were classified as default, down from almost 25% in 2011.

Member profiles

Digging into membership profiles, the highest average member balance went to adviser-led KiwiWRAP ($173,300), although at around 400 members, it was one of the smallest providers. Also at the high end MAS ($86,200), Craigs ($82,900) and Miford ($75,900) members had relatively high average balances compared to the national average of $33,500.

KiwiWRAP also had the highest proportion of members contributing at year end at more than 90%. Second was the restricted NZ Defence Force which was narrowly ahead of Kernel (over 85%) for each.

 

Two of the newer KiwiSaver schemes chalked up larger losses in their latest financial year.

But while Sharesies KiwiSaver scheme had about 5,000 members at March 31, it has since reached about 8,000 members and needs about another 5,000 to join to allow it to break even, according to Sharesies co-founder and chief executive Leighton Roberts.

Roberts says his company only went public with its KiwiSaver offer in December last year, suggesting momentum towards break even is on its side.

The KiwiSaver vehicle, Sharesies Investment Management, reported a net loss of just over $1 million for the year ended March, up from the previous year's $331,000 loss, according to accounts published with the Companies Office.

While the accounts show net equity at balance date of $123,000, suggesting the company will need more capital in a hurry, Roberts says the parent company will tip in further equity as needed.

The KiwiSaver company's revenue climbed from just $1,000 in the year ended March 2023 to $534,00 in the year ended March this year.

Sharesies currently has about 700,000 members using its share trading platform, up from nearly 600,000 this time last year, providing it with an audience for its KiwiSaver offering.

Koura Wealth, which allows its KiwiSaver investors to choose between nine different funds, one of which is a bitcoin-based fund, filed accounts with the Companies Office showing it lost $1.7 million in the year ended March, up from the near $1.5 million net loss the previous year.

The accounts show its equity holders contributed another $1.2 million during the latest year, bringing their total contributions to $6.1 million.

After accumulated losses of just over $6 million, Koura Wealth had equity of $107,000 at March 31.

But it does appear Koura is making progress, with revenue rising to $655,000 in the latest year from $305,000 the previous year.

The accounts note that Koura has a related-party relationship with Hobson Wealth, which stock broking firm Forsyth Barr bought late last year for an undisclosed sum.

Hobson Wealth former principal Warren Couillaut's Audrey Investments owns 14.8% of Koura, according to Companies Office records.

Hobson provided Koura with brokerage, execution and accounting services during the year and Koura was also a sub-tenant of a property owned by Hobson.

The accounts show key management personel were paid $378,000 in the year ended March, up from $268,000 the previous year.