KiwiSaver

A significant minority of people are making voluntary contributions to their KiwiSaver schemes to take advantage of volatile market conditions, according to research by ASB.

While most people do not pay extra, a total of 29% are paying more than they have to, said ASB senior economist Chris Tennent-Brown.

The news of people paying extra gives a boost to the standing of KiwiSaver, since it follows other research that finds overall balances are lower than they could be because other people are taking contribution holidays during difficult times.

The research could be good news for mortgage advisers whose first-time customers often use their KiwiSaver account for a deposit on a house.

Tennent-Brown said many people were sticking with existing KiwiSaver strategies, which could give them the chance to maximise long-term gains.

“Over the last few volatile months, the number of people switching has remained at normal levels,” Tennant-Brown said.

“This is really pleasing to see and it contrasts with the spike in switching that we saw in the early days of the pandemic in 2020.

“One of the questions I get asked is when markets are volatile, should people stop making contributions and the answer to that is generally no.

“People should continue their regular savings if they can. Furthermore, when markets are down, making lump sum contributions and buying when investment values are low will benefit overall savings when markets recover.”

Tennant-Brown said 29% of people had made additional voluntary contributions to their KiwiSaver, and more than a quarter of those were motivated by a desire to use their scheme to get better returns from the market.

“Whatever the reason, it is good to see people maximising some of the key benefits of KiwiSaver. It is going to help them reach their savings goals and it’s a smart financial thing to do, which is great.”

A significant minority of people are making voluntary contributions to their KiwiSaver schemes to take advantage of volatile market conditions, according to research by ASB.

While most people do not pay extra, a total of 29% are paying more than they have to, said ASB senior economist Chris Tennent-Brown.

The news of people paying extra gives a boost to the standing of KiwiSaver, since it follows other research that finds overall balances are lower than they could be because other people are taking contribution holidays during difficult times.

The research could be good news for mortgage advisers whose first-time customers often use their KiwiSaver account for a deposit on a house.

Tennent-Brown said many people were sticking with existing KiwiSaver strategies, which could give them the chance to maximise long-term gains.

“Over the last few volatile months, the number of people switching has remained at normal levels,” Tennant-Brown said.

“This is really pleasing to see and it contrasts with the spike in switching that we saw in the early days of the pandemic in 2020.

“One of the questions I get asked is when markets are volatile, should people stop making contributions and the answer to that is generally no.

“People should continue their regular savings if they can. Furthermore, when markets are down, making lump sum contributions and buying when investment values are low will benefit overall savings when markets recover.”

Tennant-Brown said 29% of people had made additional voluntary contributions to their KiwiSaver, and more than a quarter of those were motivated by a desire to use their scheme to get better returns from the market.

“Whatever the reason, it is good to see people maximising some of the key benefits of KiwiSaver. It is going to help them reach their savings goals and it’s a smart financial thing to do, which is great.”

Generate KiwiSaver has made a second investment into social housing.

Generate KiwiSaver Scheme has made a $13.7 million impact investment into the Te Puna Hapori – Verdi Social Housing Bond.

The deal provides funding for two new social housing projects, which will house 39 families (at least 78 people) currently living in sub-standard accommodation.

The lessees, Emerge Aotearoa and the Salvation Army, will each lease one of the developments and offer them as safe and affordable housing for families who cannot afford their own homes.

The leases are further underpinned by contracts between the lessees and the Ministry of Housing and Urban Development (MHUD).

The deal is a win for both the future housing tenants and members of Generate KiwiSaver Scheme, delivering investors both a sound investment return and social impact. The bond is split
into two tranches, each with fixed interest returns over at least five years backed by a stable profile of payments from long-term leases.

“Responsible investment is one of our core values at Generate and this investment really ticked all the boxes for us,” Generate fixed income portfolio manager Ayrton Oliver says.

“The Te Puna Hapori – Verdi Social Housing Bond, allows us to use our investing power to create positive change in our community, while still delivering attractive returns for our members,” he said.

The bond is the first impact investment delivered in New Zealand by Brightlight, an impact investment management firm committed to transforming lives through investments across Australia and New Zealand.

Impact Investing is nothing new to Generate. In 2020 Generate was the first KiwiSaver scheme to invest in social housing via a $21 million investment into Salvation Army community bonds, which
helped build 118 new warm, dry, affordable community houses across three locations.

Simplicity has dropped its membership fees from all of its products effective immediately.

The nonprofit KiwiSaver provider says that from today all of its members will no longer pay membership fees on any Simplicity funds.

Previously, adult members paid a $20 a year membership fee.

Managing director Sam Stubbs has been scathing in his criticism of industry fees, which he says remain far too high.

Over the past five years, the nonprofit has reduced its membership fee four times, including this recent move.

In contrast, the latest Morningstar KiwiSaver survey shows a median annual membership fee of $23 for growth and balanced funds and $9 for conservative funds.

Simplicity’s management fee remains in place at 0.31% per annum for all of its growth, balanced and conservative KiwiSaver and investment funds and 0.10% per annum for New Zealand share and bond funds.

The latest Morningstar survey shows mean management fee charges of 1.18% for KiwiSaver growth funds, 1.03% for balanced funds, and 0.68% for conservative funds.

Stubbs says KiwiSaver fees in 2020 were $650 million, a massive number given there are no capital requirements or any need for additional bank branches.

"Average management fees for KiwiSaver funds are two to four times higher than a not-for-profit provider like Simplicity.

"It’s party time for banks and fund managers, but a rip off for hard working New Zealanders."

He says 2021 has been a banner year for Simplicity, with fast growth, becoming a default KiwiSaver provider and winning some key customer satisfaction awards.

Simplicity has over $4 billion of funds under management and over 76,000 members in its KiwiSaver and investment funds.