KiwiSaver

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Sharesies is a recent arrival on the KiwiSaver scene but says it’s finding favour with customers who access all their investments in one place.

Thirteen months after launch of its KiwiSaver offering, the wealth app this week celebrated the 10,000 member milestone for its scheme, which offers access to base funds managed by Milford, Pathfinder, Pie Funds and Smart, alongside individual company and ETF picks. The Sharesies investment platform has around 750,000 customers.

Sharesies’ GM of Super and Funds Matt Macpherson says customers’ desire for consolidation has been a major driver of the scheme’s growth, as it was with the banks in the early days of KiwiSaver.

“People wanted their KiwiSaver in the same place they’re logging on to do their other banking and it made a lot of sense for them, because they didn’t have to worry about another sign in, they didn’t have to worry about tracking it somewhere else,” he says.

“We’re actually seeing that working to support customers switching to us, they want to see all their investments in one spot.” 

However, it’s not just existing KiwiSaver investors the company is targeting, with around 10 percent of business coming in the form of customers new to KiwiSaver, says Macpherson. 

“We’re engaging people to get involved, maybe they’re in their mid-forties or fifties even, and they’re signing up because we’ve made it more convenient and an easy process.”

The ability to maximise US exposure appears to be another drawcard for investors, with most gravitating towards the US 500 in their individual picks. So much so, Sharesies is turning it into a base fund option for KiwiSaver investors.

Macpherson admits it’s been a more challenging road to market than the company expected, but says he hopes to see it continue to grow at a sustainable pace.

“We’ve got things like kids accounts we don’t currently support, our ambition is to try to complete the product, it’s probably about three quarters of the way there.”

KiwiSaver members will likely be keeping a closer eye on their balances as their pot grows but for most a straightforward management approach remains the best fit, says Milford Asset Management’s Head of KiwiSaver and Retail.

Reflecting on the evolution of KiwiSaver and recent innovation in the sector, Murray Harris tells Good Returns that it is only natural for savers to become more interested in their invested savings and how they’re managed as their balance grows larger.

“We've seen some very specialist emerging market funds, and I think for a small percentage of the KiwiSaver membership, they'll be interested in that and obviously cryptocurrency and Bitcoin has been an area people have got an interest in too.

“And we're seeing innovation in the product side, which is good to see as well.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

Those more interested in long-term investing and taking on more risk would likely continue to seek advice and look at whether a growth fund primarily in equities is a good solution, says Harris.

“But for your average KiwiSaver member a good, well-diversified fund with a bit of equity to bonds and equities for the main is enough.”

“I think, as in all markets, you see innovation, some of it gets traction, some of it doesn't.

“But I think the core of the KiwiSaver market really is your traditional, diversified fund-type investor,” he says.

Receiving the right advice at the right time remains crucial for KiwiSaver members, says Harris.

“The experience in Australia was when super balances got to about the value of a new car, that's a lot of money, and people don't want to muck it up – it’s going to be their retirement.

“They want to make sure that they've set the right goal, they are aware of the risk profile, and they're in an appropriate fund and contributed enough.”

Staying ahead of the pack

Heading into 2025, Milford will work to maintain its position as one of the top performers in the market, says Harris. Growing competition in the KiwiSaver landscape and the maturing of investors has been beneficial for independent brands like Milford, allowing them to step out from the shadow cast by the major banks. 

“In the very early days, there was a large land grab by the banks, because they had great brands, and people recognised them and saw them as being a safe place to have their money.

“But I think as balances have grown and people's maturity has grown around KiwiSaver, they're starting to look outside the banks and the mainstream players and saying, hey, you know, who do I really want my money managed by? Are they experts in managing money? Are they providing great service? Do they have great tools and access to advice?

“And so I think that's why you're seeing, you know, when you look at the flow stats, money flowing to some of the smaller independently-owned providers.”

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.