KiwiSaver

Making KiwiSaver a compulsory savings isn’t the silver bullet to address New Zealand’s dismal savings record, with the evidence across the Tasman unclear, according to the Savings Working Group.

The group’s chairman, Kerry McDonald, told a media briefing in Wellington the group was using Australia as a “laboratory” to draw on the experience across the Tasman. Though Australia’s had compulsory superannuation since 1992, McDonald said the data was unclear as to whether it had boosted that nation’s overall level of savings.

“The data I’ve seen at this stage is pretty equivocal on whether it increases national savings or not – I need to be pretty clear that’s work in progress,” McDonald said.

The group won’t be looking at the household sector, which includes KiwiSaver, until later this year, he said. 

The group has been tasked with finding ways to lift the level of New Zealanders’ savings across the board, and was asked to focus on government saving, tax on capital income and the role of KiwiSaver. Finance Minister Bill English excluded New Zealand superannuation from the terms of reference.

The group won’t offer recommendations on issues outside the terms of reference, McDonald said they may make wider comments on issues such as superannuation, and recommend the government revisit some of the taboo topics.

The group has met twice so far and has taken a wide macro-economic look at the issues facing New Zealand, putting much of the blame on the poor performance of the tradeable export sector over the past decade, he said.

This has encouraged foreign investment and local reliance offshore debt, which in turn lifted interest rates and the strength of the kiwi dollar, which fed the imbalance further, he said. The group estimates interest rates are 1.5 to 2.5 percentage points more than they should be.

The group meets tomorrow and will focus on the government sector, with spending cuts likely to be on the agenda.

McDonald said the group’s recommendations don’t have to be fiscally neutral, but any proposals to take money from the government coffers and put it into another part of the economy have to be for the wider good of the nation.

There is potential for KiwiSaver to grow the retirement savings pool but it is unclear whether that has been the case so far according to industry experts.

Speaking at the Workplace Savings conference in Christchurch Inland Revenue senior evaluator Katherine Meerman says it is an important but unanswered question.

“Because if KiwiSaver isn’t growing the retirement savings pool over and above what would have been the case, then what has been the point?”

She says there is some indication of the potential for growth in savings, but there are also indications of substitution behavior.

She says in terms of members, the pool has had relatively steady growth for the last two years, with an average of 30,000 people joining a month and membership at just under 1.5 million which represents 38% of the total eligible population.

Inland Revenue data shows over one third of members (37%) have joined through automatic enrolment, with two thirds (63%) opting in.

Meerman says without KiwiSaver 38% of households would have been unlikely to save for retirement.

From the funds perspective, in the three years to July 2010 Inland Revenue passed $6.6 billion in funds to providers for investment.

Meerman says in the big scheme of things KiwiSaver represents a growing but still relatively small percentage (9%) of the value of total funds under management. Of the value of superannuation savings KiwiSaver makes up close to 30%.

Meerman says taking Inland Revenue data into account, she has a foot in both camps as to whether KiwiSaver is growing the retirement savings pool or not.

This sentiment was matched by BT Funds Management senior product manager Sharon Mackay who says most KiwiSaver members are contributing 2% which is a great start, but not enough for retirement savings.

She also believes too many people are in conservative funds which is not necessarily the best level of risk for their profile.

However ASB head of group investments Greg McAlister believes the retirement savings pool is seeing growth.

He says ASB as a default provider, has 252,000 members and as of last month $1.23 billion in the fund which is a number well beyond its expectations. He says overall KiwiSaver numbers are also beyond initial treasury and provider forecasts.

 

Most KiwiSaver funds were in the red over the second quarter as the markets had their first pullback after four positive quarters of strong results according to the Morningstar quarterly KiwiSaver Performance Survey.

Morningstar says the pullback was due to the global recovery being put on hold in May after uncertainties as a result of some European countries’ overhanging debt, a slowdown in China, and disappointing economic data across the globe.

As a result the New Zealand sharemarket lagged most global counterparts during the second quarter and the NZX50 Index was down 9.05%, while Australia was down 15.62% for the June quarter, and global sharemarkets fell 7.96% in aggregate.

This meant only a few KiwiSaver funds remained in the black over the second quarter, and it was the cash and fixed income heavy options which tended to do the best.

This meant that the default options largely led the way.

Mercer and ING were the top performers among the default providers and the only options to post positive returns.

Morningstar says Mercer has been the dominant performer across the default providers, easily outpacing the pack over the one and two-year periods.  

ING and Mercer also posted admirable results when compared to all KiwiSaver funds.

Morningstar says other fund managers that deserve mention for table-topping results over the June quarter were Aon Russell, Mercer, and Grosvenor, which were among the best performers in the risk-conscious Conservative and Moderate categories.

Aon Russell also performed well in the balanced, growth, and aggressive categories alongside Tyndall and Tower.

Looking out over two years is of course a better indicator of a fund manager’s performance record. Over this period, AMP, Aon Russell, AXA, and Mercer did well in the conservative and moderate categories.

In the more growth categories Fisher Funds Growth, ING, and Mercer were the KiwiSaver options with the best results.

Morningstar says the second quarter again demonstrated the perils of performance-chasing, as many of the top performers over the past year were among the bottom-dwellers when markets fell.

But the performance gap among KiwiSaver funds is opening up. In the Moderate and Balanced categories, for example, the difference between the best and worst performers over a two-year period was 7.34% and 4.79%.

Morningstar says the next quarterly report will be the three-year anniversary of KiwiSaver and while it’s still early days, given the upheaval in markets over this period, it will be a very interesting time to look at medium-term results.

As for assets under management, ING and ASB were the dominant players at June 30, with just over 40% of KiwiSaver assets between them. Below this pair was a tight group hovering above 5% – the default providers and Westpac are in this mix. Gareth Morgan is also in this group, with 5.60% of market share, while the rest of the providers fight it out for the remaining 10% of the pie.

KiwiSaver assets on the Morningstar database have grown from $954.10 million at 30 June 2008 to $5.77 billion at 30 June 2010.

 

The latest KiwiSaver Performance Survey results from Morningstar.

KiwiSaver Performance Survey – Returns to 30 June 2010
Default Options	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP (Default)	-0.46	0.58	5.05	3.13
ASB Conservative (Default)	-0.40	1.63	6.78	4.99
AXA Income Plus (Default)	-0.48	1.74	9.08	5.14
ING Conservative (Default)	0.15	2.08	7.82	5.17
Mercer Conservative (Default)	0.71	3.56	12.30	6.41
TOWER Cash Enhanced (Default)	-0.08	1.69	6.87	4.17
Multisector Options
Conservative	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP (Default)	-0.46	0.58	5.05	3.13
ANZ Conservative	0.03	2.01	8.20	5.14
Aon Russell Lifepoints Cnsrv	1.39	4.63	15.57	6.94
ASB Conservative (Default)	-0.40	1.63	6.78	4.99
Asteron Conservative	0.20	2.30	8.91	4.65
AXA Income Plus (Default)	-0.48	1.74	9.08	5.14
Fidelity Capital Guaranteed Kiwi	-0.04	1.44	5.04	4.27
Fidelity Conservative Kiwi	-1.50	1.53	7.98	4.35
FirstChoice Tracker Conserv	-0.42	1.60	6.76	4.99
Fisher Funds Conservative	-0.37	0.01	0.36	—
Gareth Morgan Conservative	-0.03	1.63	5.15	4.01
Grosvenor Enhanced Income	0.53	1.80	3.87	5.00
ING Conservative (Default)	0.15	2.08	7.82	5.17
ING SIL Conservative	0.02	2.06	8.31	5.33
Kiwibank Conservative	—	—	—	—
Mercer Conservative (Default)	0.71	3.56	12.30	6.41
National Bank Conservative	0.01	2.01	8.22	5.20
Smartshares Smartkiwi Conservative	-1.44	-0.30	4.53	3.37
TOWER Cash Enhanced (Default)	-0.08	1.69	6.87	4.17
Average	-0.12	1.78	7.27	4.84
Moderate	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Conservative	-0.14	1.30	6.74	5.45
AMP Moderate	-1.31	0.06	6.94	2.08
ANZ Conservative Balanced	-1.56	0.79	9.45	3.71
Aon Russell Lifepoints 2015	0.18	3.33	16.64	4.83
Aon Russell Lifepoints Mod	-0.58	2.56	16.59	3.73
ASB Moderate	-2.30	0.50	9.53	2.81
AXA Conservative	-0.79	1.68	10.00	5.51
FirstChoice Active Conservative	-1.94	0.51	8.47	4.44
FirstChoice Tracker Moderate	-2.32	0.46	9.57	2.61
Grosvenor Conservative	0.09	2.52	8.26	5.33
Huljich Conservative Diversified	-2.41	-3.87	5.02	6.19
ING Conservative Balanced	-1.53	0.50	8.01	3.35
ING SIL Conservative Balanced	-1.50	0.94	9.73	3.97
Mercer Super Trust Conservative	0.01	2.73	12.09	4.50
National Bank Conservative Balanced	-1.56	0.81	9.48	3.71
Smartshares Smartkiwi Balanced	-6.73	-5.64	7.36	-1.83
TOWER Conservative	-0.04	2.96	11.16	4.42
Westpac Conservative	-0.92	0.99	7.33	4.04
Average	-1.41	0.73	9.57	3.69
Balanced	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Balanced	-3.13	-1.91	7.27	-1.02
AMP Moderate Balanced	-2.45	-1.15	7.18	-0.20
AMP TOWER Balanced	-1.66	1.61	12.97	1.56
ANZ Balanced	-3.10	-0.44	10.50	2.28
Aon ING Balanced	-2.75	0.50	15.51	3.77
Aon Russell Lifepoints 2025	-1.73	1.35	17.14	1.10
Aon Russell Lifepoints Bal	-2.61	0.38	17.40	0.09
ASB Balanced	-4.77	-1.45	10.15	-0.09
Asteron Balanced	-2.71	-0.13	11.26	2.60
AXA Balanced	-4.93	-2.15	11.49	1.30
Brook Professional Balanced	-5.67	-3.59	3.70	0.95
Fidelity Balanced Kiwi	-4.36	-0.86	7.29	3.59
Fidelity Ethical Kiwi	-4.07	-1.15	6.68	-0.03
FirstChoice Active Balanced	-5.06	-2.11	9.21	0.34
FirstChoice Tracker Balanced	-4.80	-1.49	10.20	-0.13
Forsyth Barr Balanced Portfolio	-4.26	-2.74	5.90	-0.50
Gareth Morgan Balanced	-3.77	-2.05	2.84	-0.63
Grosvenor Balanced	-2.96	-0.08	9.12	3.35
Huljich Balanced Diversified	-3.70	-6.84	4.42	1.98
ING Balanced	-3.25	-1.04	8.14	1.39
ING SIL Balanced	-3.11	-0.35	10.72	2.59
Kiwibank Balanced	—	—	—	—
Mercer Balanced	-3.06	0.20	13.71	0.76
Mercer Super Trust Active Balanced	-3.19	0.07	13.46	0.71
Mercer Super Trust Moderate	-2.94	0.63	12.06	3.73
Milford Balanced	—	—	—	—
National Bank Balanced	-3.09	-0.40	10.49	2.35
TOWER Balanced	-3.07	0.62	10.77	1.44
Westpac Balanced	-4.79	-2.20	7.87	1.60
Average	-3.75	-1.13	9.64	1.27
Growth	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP ING SIL Balanced	-2.99	-0.83	13.16	0.73
AMP Growth	-4.65	-3.47	7.65	-5.45
AMP TYNDALL Balanced	-2.15	0.82	12.32	0.17
ANZ Balanced Growth	-4.58	-1.58	11.60	0.77
ANZ Growth	-6.19	-2.95	12.40	-0.90
Aon Russell Lifepoints 2035	-3.33	-0.33	17.29	-1.99
Aon Russell Lifepoints Growth	-3.83	-0.86	17.27	-2.66
Aon Tyndall Balanced	-1.68	1.18	12.76	0.07
ASB Growth	-7.33	-3.61	10.16	-3.16
Asteron Balanced Growth	-5.77	-2.96	11.92	-0.89
Fidelity Growth Kiwi	-6.82	-2.98	6.31	0.22
FirstChoice Active Growth	-7.58	-4.42	8.78	-1.96
FirstChoice Tracker Growth	-7.36	-3.64	10.21	-3.35
Forsyth Barr Growth Portfolio	-6.70	-5.32	4.64	-4.34
Gareth Morgan Growth	-7.67	-5.11	-0.78	-5.60
Huljich Growth Diversified	-5.09	-10.14	2.73	0.12
ING Balanced Growth	-5.00	-2.69	8.12	-0.52
ING Growth	-6.80	-4.42	7.93	-2.65
ING SIL Balanced Growth	-4.68	-1.65	11.73	1.02
ING SIL Growth	-6.13	-2.88	12.69	-0.57
Kiwibank Growth	—	—	—	—
Mercer Super Trust Growth	-4.58	-1.47	12.42	-1.41
National Bank Balanced Growth	-4.61	-1.56	11.62	0.73
National Bank Growth	-6.15	-2.90	12.45	-0.98
Staples Rodway Balanced	-4.55	-1.99	10.57	-1.63
Staples Rodway Growth	-3.99	-0.26	10.00	-1.14
Westpac Growth	-6.04	-3.62	8.15	-0.02
Average	-5.24	-2.68	10.16	-1.42
Aggressive	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Aggressive	-5.82	-4.71	7.71	-7.75
Aon Russell Lifepoints 2045	-4.77	-1.84	17.59	-5.04
AXA Growth	-7.95	-5.24	11.29	-2.44
Brook Professional Growth	-9.23	-6.37	5.58	0.34
Fidelity Aggressive Kiwi	-8.20	-2.42	9.98	1.20
First NZ Capital	-7.41	-4.17	4.17	-11.17
Fisher Funds Growth	-7.05	-3.38	16.93	6.12
Grosvenor Geared Growth	-7.73	-3.41	—	—
Grosvenor High Growth	-8.07	-3.91	8.42	-2.28
Mercer High Growth	-6.06	-2.81	13.11	-3.77
Mercer Super Trust High Growth	-6.22	-3.04	12.67	-3.91
TOWER Growth	-5.40	-1.25	12.92	-1.36
Westpac Capital Protection Plan (1)	-9.44	-6.39	7.63	—
Average	-7.18	-3.77	10.67	-2.73
Peer Group Averages	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Default Options	-0.09	1.88	7.98	4.83
Conservative	-0.12	1.78	7.27	4.84
Moderate	-1.41	0.73	9.57	3.69
Balanced	-3.75	-1.13	9.64	1.27
Growth	-5.24	-2.68	10.16	-1.42
Aggressive	-7.18	-3.77	10.67	-2.73
Single Sector Options
Cash	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
AMP Cash	0.93	1.83	3.75	5.23
ANZ Cash	0.49	0.98	2.01	—
Aon ING Cash	0.58	1.27	2.94	3.82
Aon Tyndall Cash	1.71	2.45	3.95	5.20
ASB NZ Bank Deposit	0.62	1.19	2.39	4.06
Asteron Capital	0.68	1.38	2.99	4.76
AXA Cash	0.77	1.64	3.96	4.62
FirstChoice NZ Cash	0.60	1.17	2.37	4.03
ING Cash Plus	0.55	1.13	2.37	4.03
ING SIL Cash Plus	0.42	0.86	1.82	3.47
Kiwibank Cash	—	—	—	—
Mercer Cash	1.54	2.36	4.14	5.28
Mercer Super Trust Cash	1.56	2.49	4.28	5.29
National Bank Cash	0.49	1.00	2.01	—
Staples Rodway Conservative	1.05	1.85	3.18	3.88
TOWER Preservation	0.69	1.43	3.00	4.54
Westpac Cash	0.63	1.30	2.87	3.79
Fixed Income	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron High Yield Fixed Interest	2.35	4.56	10.26	6.19
ING SIL New Zealand Fixed Interest	3.11	5.87	9.87	5.89
ING SIL International Fixed Int	2.96	4.48	7.59	9.46
Kiwibank NZ Fixed Interest	—	—	—	—
Kiwibank Global Fixed Interest	—	—	—	—
Mercer Super Trust Fixed Interest	3.72	7.82	17.63	11.47
Property	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron Global Property	-1.71	4.20	36.79	-11.74
ING SIL Australasian Property	-4.70	-7.71	11.67	-6.24
ING SIL International Property	-5.02	1.60	37.18	-11.43
Kiwibank Listed Property	—	—	—	—
Mercer Super Trust Real Assets	-3.83	-0.76	30.72	-5.59
Australasian Equity	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron SRI Share	-8.19	-6.36	7.54	-0.10
Asteron Trans Tasman Small Companies Shr	-11.15	-8.34	17.09	0.79
ING SIL Australasian Share	-8.50	-7.62	8.69	-0.74
Kiwibank Australasian Share	—	—	—	—
Mercer Super Trust Trans Tasman Shares	-7.68	-6.93	10.05	-0.11
Mercer Super Trust Shares	-9.40	-5.93	8.78	-7.43
Milford Aggressive	-3.76	-1.08	11.62	10.58
Smartshares Smartkiwi Growth	-12.25	-10.58	8.48	-6.61
International Equity	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Asteron International Share	-8.32	-5.26	7.30	-9.15
FirstChoice Active High Growth	-10.01	-6.33	6.84	-10.85
FirstChoice Global Sustainability Fd	-7.41	-1.72	10.89	2.71
ING SIL International Share	-8.35	-3.05	7.61	-3.51
ING SIL Sustainable Growth	-7.64	-4.49	5.27	—
Kiwibank Global Share	—	—	—	—
Mercer Super Trust Global Shares	-10.09	-5.55	8.06	-11.06
TOWER Equity	-8.82	-3.94	11.31	-6.10
Miscellaneous	3-month (%)	6-month (%)	1-year (%)	2-year (%pa)
Fidelity Options Kiwi	-4.08	3.63	18.86	7.73

 

(NB: Returns are before tax and after the fees deducted from the funds unit price.)