KiwiSaver

The KiwiSaver pot grew by $7 billion to $117.6 billion in the third quarter of this year with QuayStreet, Milford and Generate highlighted as some of the strong performers over the long term.

According to research firm Morningstar’s latest KiwiSaver survey, the third quarter saw a mixed performance across the various asset classes, with some benefiting from easing inflationary pressures and softer monetary policy. Others experienced headwinds from global economic uncertainties and domestic factors.

All multi-sector funds had a positive performance in Q3, with funds’ returns ranging from 2% to 5%.

“The Kernel balanced fund has performed quite strongly, Westpac had a bounceback quarter, they’ve been a bit sluggish over three to five years and that’s come through this quarter as well,” said Morningstar Asia Pacific Data Director Greg Bunkall.

“ANZ had a bounceback quarter as well, they performed in the top five this quarter, but the numbers between the best and worst aren’t that different this quarter.”

Some provider names were prominent over the 10-year time period, he said.

“Milford, Generate and QuayStreet tend to show up quite strongly in those numbers but there seems to be a bit of clustering at the moment.”

As for market share, ANZ still leads the pack with $21.8 billion funds, ASB moves back up to second this quarter, with Fisher Funds in third, then Westpac and Milford.

Of the default funds, Fisher Funds and Westpac topped the table with the best returns of the quarter. Most of the default funds achieved 16%+ returns for the year, compared to the average conservative fund which was around 11%.

“We continue to see the balanced over one-year performing strongly compared to conservative, which is positive because we did have that change a few years ago around default options, so people sitting in default options are having a better outcome,” Bunkall said.

“BNZ default over one-year is at 18.1%, Booster default is 18.2%, Simplicity 18.1% – they’re performing strongly especially in relation to where clients would’ve been if they’d been in conservative.”

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.