KiwiSaver

Women are erring on the side of caution when investing in KiwiSaver while men appear to be more comfortable with higher levels of risk, according to Fiona Oliver, Chief Operating Officer of BT Funds Management, the developer and manager of the Westpac KiwiSaver Scheme.
Press Release

Oliver’s comments are based on membership data from the highly popular Westpac KiwiSaver Scheme, which offers five investment funds to suit a wide range of “investment appetites”, including a unique Capital Protection Plan Fund (CPP) that protects contributions to maturity.

Membership of the Westpac KiwiSaver Scheme is currently more than 55,000 and is skewed towards females (56%).

To date, females have been attracted towards more conservative Westpac KiwiSaver investment options with 59% of investors in the CPP being female. Oliver said take up numbers in the other Westpac KiwiSaver investment funds also indicated that women were exercising more caution when making their investment selection, with 60% of the investors in the Cash Fund and 58% of the investors in the Conservative Fund being female. These investment funds are aimed at those seeking lower levels of risk and more stable returns. Oliver says that with the current market volatility, she anticipates conservative investment options like the CPP will continue to attract more investors, including a higher percentage of women.

“The CPP is a unique KiwiSaver investment option which we developed specifically for people seeking peace of mind,” she said. “We designed it for those who would be anxious if their investment funds went down or fluctuated as it protects the contributions to the maturity of the fund.”

Oliver said that subject to certain circumstances, CPP protects members’ contributions, plus whatever the government and their employers have contributed. However, she said CPP also offers the potential for higher returns through its exposure to shares. Oliver added that while she had expected the CPP to appeal to women, she had been pleasantly surprised at how attractive it had been to this group.

“Currently, women appear to be the more cautious of KiwiSaver investors,” said Oliver. “However, they also have strong representation across all funds, and the fact that they are choosing the CPP that protects their capital but also gives them the potential upside of shares shows they are thinking long term.”

BT manages and administers around $2.0 billion of funds under management. BT provides a wide range of investment options, including funds managed by its own teams as well as alliances with global investment managers. Westpac purchased BT in 2002.

Two thirds of owners of mid-sized New Zealand businesses surveyed for the Grant Thornton International Business Report say that fewer than 10% of their employees have signed up for KiwiSaver.In nearly 20% of cases, no staff at all have signed up. And only 6.7% have more than half of their staff on the KiwiSaver scheme.

The Grant Thornton survey also found that 54% of business owners felt the KiwiSaver scheme would have a negative impact on them, while 56% considered it would have either no impact or a negative impact for staff.

“These results are interesting because they would seem to point to either a general sense of dis-favour or indifference to the scheme among many employers who are the owners of medium-sized businesses,” said Grant Thornton New Zealand spokesman Peter Sherwin.

“This is possibly an extension of their overall discontent with having to deal with so much Government-generated paperwork, red tape and the cost of compliance. The compulsory 1% employer contribution from April 1 will most likely create further irritation.

“On the other hand, the figures most likely also contain an element of lack of interest in KiwiSaver from employees.

“But whatever way you look at it, the initial response to KiwiSaver is not exactly stellar. And part of that could be that business owners see it as yet another burden for medium-sized businesses to shoulder.

“There is clearly the need for some work to be done yet to make KiwiSaver more appealing all round.”

Sherwin said if there was some encouragement for the scheme, it lay in the fact that 42.7% of the business owners felt it would have a positive impact for their staff and 20.7% felt it would have a positive impact for them as employers.

The results were obtained from questions specifically for New Zealand businesses, contained within the wider international survey.

KiwiSaver is all about the long-term prospects. That’s the message being shouted from the rooftops in the face of recent short-term uncertainty.AMP Capital Investors’ Head of Investment Strategy, Dr Leo Krippner, believes rationality is key.

“Over the 2007 December quarter, risk was realised rather than rewarded”, said Krippner.

“Growth assets generally had a poor performance, reflecting fears that a US recession might impact negatively on global markets. That left returns flat for the conservative diversified fund and negative for the balanced and growth diversified funds.

“But returns were reasonable for the year as a whole. AMP Capital’s conservative diversified fund returned 7.1%, our balanced diversified fund returned 6.9%, and the growth diversified fund returned 6.8%. These were more modest than 2006, but diversification and active management helped to hold returns up.

“For example, New Zealand commercial property was a good performer over the December quarter returning 1.9% and an outstanding 30.8% for the year. Conversely, the worst performer for the quarter and year was global property at -10.1% and -9.7% respectively. Holding more New Zealand property and less global property certainly made a positive contribution.

“Our central view remains for reasonable returns. We think global growth should continue at an even pace – although lower in the US and developed countries – and inflation should remain at moderate levels. Long-term horizon returns suggest that growth assets are reasonably valued. However, downside risks have become more tangible even over the past month. So, as an active manager of our clients’ portfolios, we think it prudent to be cautious at this stage.

“The key thing for New Zealanders who have started their KiwiSaver accounts to remember is to focus on the next three decades rather than the last three months. While market volatility has forced returns down, KiwiSaver has easily beaten the under the mattress alternative when the Government’s contributions are taken into account. And compulsory employers’ contributions which come into play on 1 April this year will also significantly enhance the KiwiSaver investment outlook,” said Krippner.

The number of New Zealanders joining KiwiSaver continues to beat initial expectations, finance minister Michael Cullen said today.At the end of January, 414,144 Kiwis had joined up, compared with the Treasury’s initial projection of 276,000 by July 2008.

Cullen believes the surge in New Zealanders saying yes to personal saving, despite unstable international markets, is a sign the country’s ‘savings culture’ is growing stronger. He believes more people are keeping “an eye on the long-term benefits of saving and investing.

“KiwiSavers are focusing on the long term and that is good news for the long-term economic and social well-being of the whole country.”

Revenue minister Peter Dunne believes one of the most positive aspects of the latest data on registrations is the popularity of KiwiSaver amongst younger people.

He believes the level of registration among young adults indicates that KiwiSaver is encouraging greater levels of savings, compared to if the scheme had not been introduced.

“Starting the savings habit early will mean that these young people will be able to generate significant savings by the time they retire and in some cases will be able to use their savings to buy a first home,” he said.

At the end of January 2008, around 55% of KiwiSavers were under 45 years of age and around 22% were younger than 25.