KiwiSaver

ING has become the first KiwiSaver provider to hit the $1 billion mark in funds under management.

ING head of KiwiSaver distribution David Boyle says the number of New Zealander’s that have joined KiwiSaver is much greater than was expected when KiwiSaver was first launched in 2007.

“We’re rapt to have reached the $1 billion mark, it’s a milestone we’re very proud to have achieved,” he says.

FundSource research shows that ING has been the leading KiwiSaver provider since the scheme started and that it has around 284,000 members.

ING attributes its success to strong distribution channels through relationships with ANZ National Bank, independent advisers, and through being one of the default providers.

Boyle says the support from the advisory community has been wonderful and he firmly believes financial advice is an important component in making financial decisions.

“I think there will be a greater requirement for advice going forward as balances grow to make sure people are investing in the right type of funds for their circumstances,” he says.

Over the last year an average of 30,000 New Zealanders a month joined KiwiSaver.

It is expected that the growth of new membership will slow over the next year. However the Australian portability legislation scheme is expected to create new opportunities for growth by funds under management as New Zealanders evaluate the pros and cons associated to repatriating their funds back to New Zealand.

So far about 1.25 million New Zealanders have joined the scheme of about 3.8 million under 65 and eligible to join KiwiSaver.

Boyle says a focus for ING next year is to make sure those New Zealander’s that have not joined are aware of the benefits.

Mercer, the only default KiwiSaver provider without a distribution network, has reduced fees on its funds.

It says the reduction is “in response to consumer demand for competitive pricing” and warns investors could be missing the point by focusing on the level of fees alone.

Mercer’s New Zealand boss, Martin Lewington, says a lack of transparency in the system and the inability for consumers to make direct comparisons between products is the real issue around costs.

“Mercer’s member research found that 86% of members rated competitive fees as an important or very important fund feature.”

Its changes include a reduction of more than 25% in the Mercer Superannuation Trust (MST) KiwiSaver product from $3.85 per member per month to $2.85.

Other changes included reductions in fees to its Cash Option, Active Balanced Option, and Membership fee, as well reducing the admin fee (to 0.15%) and Trustee fee (to 0.03%).

“Fees are necessary in most retirement income savings systems and it is true they can impact retirement savings.

“However, this is only one part of the picture: there is a broader problem in New Zealand with fees, which is not necessarily their size, but the lack of standardisation in relation to KiwiSaver, which makes it very difficult for consumers to compare apples with apples,” he said.

Mercer advocates the introduction of standardised fee disclosure and believes it will make product comparisons easier for researchers, advisors and consumers.

“We want to see greater transparency and visibility around the composition of fees, so that New Zealanders can make educated decisions regarding their retirement nest-egg.

“You only need to look as far as the labelling of fees by providers to see that it is inconsistent. For example some providers appear to load their admin fee into their investment fee while others quote their expected returns net of tax, investment fees and other expenses,” he said.

Lewington argues that it’s in the industry’s interests to make KiwiSaver easier to understand and standardisation is also needed around unit pricing.

Mercer has chosen to calculate unit prices net of tax and fees on a daily basis.

Family members will no longer be able to sign children up to KiwiSaver after refinements are made to the KiwiSaver scheme in the forthcoming tax bill.

Currently anyone can sign-up a child under 18 to the retirement savings scheme, and once the child is working and earning an income, he or she has to contribute unless choosing to take a contribution holiday.

However the tax bill to be presented to parliament before Christmas will introduce a new set of rules which will restrict sign-ups for those under 16 to legal guardians and 16 – 17 year olds will have to sign jointly with a legal guardian to give permission for the KiwiSaver membership to go ahead.

Those without a legal guardian will have to sign forms giving their permission.

Revenue Minister Peter Dunne says the changes are being proposed to stop family members from locking youths into KiwiSaver which they may not want to contribute to later in life.

The main incentive which has encouraged family members to sign their children up to KiwiSaver is the $1000 kick-start payment received by all those who sign up, which many perceive as free money.

Inland Revenue says most members under 18 years are not contributing to their accounts.

For the 2008/09 year, 6% of the more than 180,000 members who are children contributed through Inland Revenue to their accounts at a total value of $2 million.

 Inland Revenue says this means there are likely large numbers of accounts being managed by providers containing nothing more than the $1,000 kick-start payment which means money is whittled away by fees before a contribution is even made.

Of the contributing children, almost all are contributing through salary or wage deductions.

The changes to KiwiSaver are expected in July next year.

 

With returns of 15.2% in the quarter and 20.3% in the past 12 months, Fisher Funds was the best performer in the two growth categories. The annual median growth fund return was 1.2% with a quarterly return of 10.8%, according to the survey.

“In the last six months balanced and growth funds have pegged back approximately half the losses experienced through the global financial crisis,” New Zealand head Martin Lewington said in a statement. “This return to positive growth territory is good news for investors, particularly those with a long-term horizon who can afford to ride out the short-term volatility.”

The best performing default fund in the quarter and the over the past 12 months was the Mercer KiwiSaver Conservative Fund at 6.5% and 3.2% respectively. The median return was 4% and 5.9% respectively. The best performing conservative funds were the Mercer Conservative Fund for the quarter at 7.3% and the AXA Conservative Fund over the past 12 months at 8.5% compared to a median of 5% and 4.8%.

The best balanced fund in the quarter was the Mercer Active Balanced Fund at 10.9% and the Mercer Moderate Fund which returned 7.4% in the past 12 months. The median was 7.8% and 3.1%.

Lewington said KiwiSaver funds under management were growing at an “unprecedented rate” with the six default funds surging 36% in the past quarter to $1.64 billion. Almost 1.2 million New Zealanders were enrolled in KiwiSaver at September 30, with some $4.25 billion under management.

Stronger returns in the past quarter encouraged a shift to growth assets among providers, he said.

“Multi-strategy funds, even at the conservative end of the spectrum, have tilted their allocations towards the growth assets,” he said.