KiwiSaver

OnePath and ASB remain the dominant players in the KiwiSaver market, with 45.40% of KiwiSaver assets between them, according to the Morningstar KiwiSaver Performance Survey for the June quarter.

Morningstar’s co-head of fund research, Chris Douglas, said that while KiwiSaver results for the second quarter were mixed, largely due to the high Kiwi dollar creating a headwind for offshore investments, “it’s pleasing to see that many KiwiSaver funds are continuing to perform admirably over longer timeframes, especially when looking at performance from an investor’s standpoint.”

The survey also found that OnePath (mapping to SIL, ANZ and National Bank KiwiSaver options), Mercer and Westpac were the best performing multi-sector KiwiSaver options over the June quarter.

Looking at one and two year figures, a better indication of a fund managers performance, the survey found the Fisher Funds Growth KiwiSaver was the best performing multi-sector fund, “streaks ahead of peers over the past three years,” according to Douglas.

Aon held the second and third place spots with the Aon KiwiSaver Russell and Aon KiwiSaver OnePath.

Within the single sector options, listed property funds’ one-year returns have benefitted from the strong performance of the Kiwi and global listed property markets over the second quarter.

New Zealand property returned 22.08% and global property 44.16% over the past year, and the strongest performances were produced by the SIL KiwiSaver International Property and SIL Kiwisaver Australasian Property.

Morningstar also used time-weighted calculations to take account of the fact most KiwiSavers add to their funds incrementally, finding “KiwiSaver truly has been a great experience for the majority of investors.”

“When looking out over three years, investors in the more growth-orientated funds have experienced very strong results, despite the highly volatile market conditions,” Douglas said.

Morningstar also found KiwiSaver assets on their database had grown from $954.1 million in June 30, 2008 to $8.53 billion by June 30, 2011, “a phenomenal growth rate.”

The acquisition of Huljich funds helped Fisher Funds almost double its KiwiSaver assets, though OnePath and ASB remain the dominant players.

The survey also questioned ASB’s April 1 decision to increase the fees for a number of its KiwiSaver options.

The second largest KiwiSaver provider, with more than 20% market share and $1.78 billion in KiwiSaver funds, claimed the change was aimed at simplifying its fee structure and meeting increased technology and communication costs.

Douglas said the size and scale of ASB, the largely passive (ie low cost) nature of its investments and its economies of scale from predicted growth should be keeping its costs down.

“Given the tremendous success of KiwiSaver and the amount of money ASB manages, this was a surprise move,” Douglas said.

“While we applaud a more transparent approach, the increase in fees made no sense to us.”

Total KiwiSaver membership topped the 1.75 million mark in June despite a downturn in the sign-up rate, according to KiwiSaver provider Tower Investments.

 

Chief executive Sam Stubbs said that while the membership milestone was passed, “growth rates for KiwiSaver sign-ups fell after the Government’s Budget announcements of late May.”

“Anecdotal evidence indicated that public perceptions of KiwiSaver had turned somewhat negative since the Budget set out reduced Government subsidies, increased taxation, and larger employer and employee contribution minimums to be phased in for the scheme over 2012-13.”

Stubbs also said talk of potential compulsion had demotivated some people from joining the scheme “who believe they might be forced to belong later anyway.”

He said June was also a rocky month for investment markets with fears Greece’s debt problems could spark another global financial crisis, though those fears abated late in the month.

“Total net monthly growth in new membership dropped from above 1.5% in May to under 1.4% in June, with opt-in via employer and opt-in via provider leading the trend down.

“The only original KiwiSaver join method to show an increased rate of sign ups was automatically enrolled by employer, which lifted from a little over 1.4% in May to not far short of 1.5% in June.”

However, Stubbs said it was too early to tell if the June downturn in new KiwiSaver sign-up rates was a blip or “a significant turning point in public appetite for the scheme.”

“If June’s monthly membership grow rate continues for the rest of the year, there should be about 1.9 million KiwiSaver’s by the end of 2011,” he said.

Changes to the number and nature of KiwiSaver default scheme providers is “worth examining in slower time”, according to a Treasury paper on Budget 2011 KiwiSaver reforms.

The paper, dated February 18, is one of a host released by the Treasury last week relating to Budget 2011.

The paper also revealed Ministers rejected proposals for a ‘soft’ compulsion recommendation and that the Treasury was aware the changes would create “uncertainty and unpredictability which is not helpful or encouraging to individual savers.”

One of the proposals rejected by Ministers would have seen “all eligible employees who have not previously been auto-enrolled and are not already members of KiwiSaver or an approved superannuation scheme, who do not indicate in advance of the enrolment that they do not wish to be enrolled.”

The need to carefully communicate the recommendations was also highlighted, as the paper acknowledges the changes “may reduce perceptions of the stability and predictability of the scheme.”

Budget changes to KiwiSaver may make the scheme less attractive for people to join, according to Tower Investments CEO Sam Stubbs.

“Perhaps more disconcerting for potential members is that KiwiSaver’s rules have been changed again by the Government, which starts to chip away at certainty around retirement planning arrangements.”

Stubbs made the comments as default KiwiSaver provider Tower released its monthly analysis of the IRD’s KiwiSaver member count for May.

“May saw continued overall increase in KiwiSaver sign-ups, with net total membership rising 1.5% for the month to break through the 1.73 million mark,” Stubbs said.

“Opt-in via KiwiSaver provider grew the strongest at 1.8% increase, to take membership counted by that joining type to more than 860,000.

“Coming in just behind for growth rate was the automatically enrolled by employer category, which grew by 1.4% to over 640,000, and after that opt in via employer, which lifted less than 1% to 230,000.”

Stubbs said that if monthly KiwiSaver membership growth rates continue to average around 1.5% for the rest of the year, over 26,000 new members will sign up per month, taking total membership to around 1.8 million by the end of the year.

However, the Budget changes have created uncertainty around future membership numbers.

“The wild card was changes to KiwiSaver announced in the Government’s Budget on the 19 th of May,” Stubbs said.

“There was some evidence of slowdown in KiwiSaver sign-up rates over Budget month, but the most affected categories were opt in via employer and automatically enrolled by employer, and these categories may be more expressive of labour market conditions.

“Opt-in via provider would have been the category most likely to have shown up as a bellweather for public concern over the impact of the Budget on KiwiSaver, but the monthly sign up rate for May was similar to April’s.”

While Stubbs said the Budget changes may make the scheme less attractive in the short run, “its financial impacts on KiwiSaver member accounts do not flow through until 2012 in the form of taxation of employers’ previously tax-exempt minimum contributions and halving payments of the Government’s Member tax Credit subsidy.”

He said Government rule changes to the scheme could dent confidence in KiwiSaver as a vehicle for long-term savings, but “we probably won’t know for a few months yet whether the growth rate of sign-ups to KiwiSaver has been seriously impacted by the Budget.”

Despite the recent changes, Stubbs remains convinced of the scheme’s worth.

“Even with KiwiSaver becoming less generously supported by the Government, it is still an efficient, low-cost, well-regulated retirement savings vehicle.”