KiwiSaver

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.

 

Legislation allowing New Zealanders returning home from Australia to bring their retirement savings with them will be introduced to Parliament in about two weeks, Finance Minister Bill English says.

Providing the necessary law changes are made in Australia, it is envisaged the new arrangements will take effect in the second half of next year.

Currently, Kiwis who work in Australia must contribute to an Australian complying superannuation fund. However, the savings are locked into the Australian scheme until the saver reaches retirement age.

English signed an agreement with Australian Treasurer Wayne Swan in July, which paved the way for the new super portability scheme.

It will allow retirement savings from certain Australian superannuation funds to be transferred into New Zealand KiwSaver funds – and vice versa. New Zealanders bringing their savings home must put them into a KiwiSaver fund.

Australia’s Tax Office has estimated that it holds about A$13 billion ($16.6 billion) in “lost accounts” in the Australian superannuation system.

“We expect that much of this money could belong to New Zealanders who have returned home and these new rules will allow these funds to be brought back to New Zealand,”  English says.

Participation in the super portability scheme will be voluntary.

The government will include the changes in the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver and Remedial Matters) Bill, expected to be introduced to Parliament in mid November.

Key facts about the Super portability changes

• The transfer of retirement savings between the two countries will be exempt from entry and exit taxes. Under current tax laws, transferring savings from Australia to New Zealand may be regarded as a taxable dividend. The proposed legislation will ensure this does not happen.
• KiwiSaver members moving from New Zealand to Australia will be able to retain any member tax credits if they transfer to an Australian scheme.
• KiwiSaver members will not be able to withdraw money transferred from Australia to help them buy their first home, but they can use the interest earned on those savings for this purpose.
• Retirement savings transferred from Australia into a New Zealand KiwiSaver scheme can be withdrawn when members reach the age of 60 as long as they have retired – as set out under Australian scheme rules. KiwiSaver savings transferred to Australian schemes can be withdrawn when members reach 65 – as per New Zealand KiwiSaver rules.

KiwiSaver membership reached almost 1.2 million people in its second year, a growth of 54%, according to figures released by the Inland Revenue Department (IRD).

 

“We saw KiwiSaver’s membership reach almost 1.2 million people (1,189,597 as at end of September, 2009), with growth of 54% in that second year,'” Revenue Minister Peter Dunne says. 

“That means about 32,000 people joining every month which is tremendous.”

He said it is particularly significant to see the number of young people taking responsibility for saving for their future.

“The uptake has been good across the board, but it‘s particularly notable among people aged from 19 through to their mid-20s.”

Dunne said in the year to June 2009, $2.1 billion in contributions from members, employers and the Crown were passed to providers for investment, more than double the amount for the first year. In total, $3.15 billion in contribution was transferred to providers in the scheme’s first two years – or $4.25 billion to the end of September.

The report also looks at members’ contribution rates, which included the changes in April 2009. It found that of those who joined KiwiSaver since the changes, approximately half were contributing at 2%. However, most of those who joined before April 2009 have not changed their contribution rate.

The evaluation process runs from 2007/08 until 2012, and is a joint project between IRD, the Ministry of Economic Development and Housing New Zealand. 

Its objectives are to:

• Assess the implementation and delivery of KiwiSaver in order to inform ongoing development and service delivery
• Assess whether the key features of KiwiSaver are generating the expected outcomes
• Monitor KiwiSaver usage to understand the scale and pattern of take-up
• Examine the impact of KiwiSaver on individuals’ saving habits and asset accumulation
• Examine the impact of KiwiSaver on superannuation markets and the financial sector.

KiwiSaver investors with strong stomachs and funds in high growth, higher risk assets did best as the global market recovery over the past six months, according to a Morningstar Australasia survey.

A substantial investment market rally has seen the NZ sharemarket up 22%, Australia up 35% and the aggregate global sharemarket up almost 12% since March. “The past six months have clearly illustrated how quickly markets can turn around,” said Chris Douglas, Morningstar Australasia’s manager, Fund Analysis. 

“KiwiSavers who switched to conservative options would have missed out on these rapid gains. While short-term volatility is inevitable, KiwiSaver options investing in growth assets continue to offer the greatest potential for growing the value of retirement savings over the longer term.” 

Reporting on over 120 KiwiSaver investment options, all categories produced positive results said Douglas. The best-performing funds were the growth-oriented vehicles with greater proportions of their assets in local and international share and listed property. “

These were the funds that were hardest hit by the market declines from late 2007 to early 2009,” he said. “Most KiwiSaver options in the Multi-Sector Growth and Aggressive categories returned 15 to 20% over the six month period.

Conversely, more conservative funds that invested principally in cash and fixed interest have not benefitted from this rally.” 

The majority of KiwiSaver assets are in multi-sector funds which invest in a range of assets. However, the top performing KiwiSaver funds over the two years to September 30 2009 were in single-sector categories according to Morningstar.

An absolute return approach and ultra-high cash weighting enabled Aon KiwiSaver Milford Aggressive to return almost 13%. “We have cautioned in previous reports about the trade-off between maintaining a high cash weighting and potential returns,” Douglas said.

“A high cash weighting will hold up returns during market downturns, but acts as a drag when markets recover. The three and six-month returns to September 30 2009 for a number of options illustrate this clearly – they did not perform as well during the market rally as funds with higher weightings in growth assets.” 

To view the full KiwiSaver performance table, click here.