KiwiSaver

The FMA is working with ANZ to see if behavioural insights can prompt more ANZ KiwiSaver members to get retirement advice, or use retirement-planning tools, when they hit 56 years old.

The pilot study is designed to examine if adjusting communications sent to ANZ KiwiSaver members at age 56, and users of their “lifetimes” investment approach, results in more members checking they are on track to achieve their retirement goals. The study also wants to find out if they take action or seek advice, if they are concerned they are not meeting their goals.

Recent FMA research shows New Zealanders who started retirement planning at least a decade before they left the workforce had the highest levels of confidence about funding their retirement.

Paul Gregory, director of external communications and investor capability at the FMA said: “This is why the pilot with ANZ is targeting 56-year-olds. They’re at a critical moment when they’re still far enough away from retirement to make a real difference with the decisions they make now.”

In 2016, the FMA published a paper outlining the value of behavioural insights in aiding good investor decision-making. Since then, the FMA has worked with two KiwiSaver providers to explore how improved interactions with their KiwiSaver members could prompt more frequent and better decision-making.

An earlier pilot, with Kiwi Wealth, focussed on decision-making around default funds.

Gregory said: “We hope both pilots will show real and positive outcomes for both investors and providers, prompting other KiwiSaver schemes to take on board these insights.

“We also think there are insights here for managed investment schemes in general.”

ANZ general manager of funds and investment Ana-Marie Lockyer said ANZ supported any moves to help members save for a comfortable retirement.

“ANZ’s lifetimes option automatically moves KiwiSaver members’ money into funds that are appropriate for their age,” she said. “But, everyone is different and it would be good to see if we can encourage members to take a closer look at their retirement savings plan while they’re still at an age where they can take steps to boost their savings.”

The ANZ behavioural insights pilot will run from May until the end of the year.

Increasing optimism about the world economy led to a lift in global sharemarkets in the March quarter and boosted some local KiwiSaver funds, Morningstar says in its latest update.

Its survey for the first quarter of this year shows that KiwiSaver schemes with a bias to shares out-performed, while those with strong cash and fixed interest holdings performed comparatively poorly.

The average multisector category returns ranged from 5% for aggressive funds to 1.8% for conservative options.

Morningstar noted that the local sharemarket was up 4.6% in total returns over the quarter, which buoyed funds with a New Zealand equity exposure.

In Australia, the S&P/ASX200 was up 4.8% over the same period.

“Increased optimism about the wider outlook for the world economy, partly US-related and partly based on evidence of stronger performance in China and elsewhere – led to strong rises in world equity prices up to March,” Morningstar said.

“The MSCI World index was up 6.1% in NZD. The US did well, with a likely economic boost from the Trump administration fiscal policy, the S&P 500 index was up 5.9%. European shares also rose on evidence of a firming eurozone economy.”

KiwiSaver schemes in the aggressive and growth categories were the top performers, posting mid-single digit returns for the quarter.

KiwiSaver schemes in the conservative, moderate and balanced categories posted returns in the low-single digits.

Over the March quarter Booster KiwiSaver Geared Growth, OneAnswer KiwiSaver-Growth, Aon KiwiSaver Russell Lifepoints Balanced, Aon KiwiSaver Russell Lifepoints Moderate, and Milford KiwiSaver Conservative were the top performers across their respective categories.

Morningstar said Aon Russell Lifepoints was a notable performer over a longer term.

“Other KiwiSaver Schemes that deserve a mention include, ANZ KiwiSaver and OneAnswer KiwiSaver, ASB KiwiSaver, and Milford KiwiSaver Balanced. The best performing KiwiSaver Schemes since inception is Milford KiwiSaver Active Growth.”

Morningstar noted that the six biggest KiwiSaver funds continue to hold the vast majority of all KiwiSaver money  – now a 84.9% of the Morningstar database.

KiwiSaver schemes will have to show investors the dollar cost of their annual fees, from next year.  

Now, the FMA is consulting on how those fees should be calculated and disclosed.

It wants all providers to calculate the dollar figure of their fees int he same way.

It has released a proposal for all schemes to use a total expense ratio calculation, and is seeking industry feedback.

It said the method would work for all funds and by including fund charges, would take into account underlying costs. “Providers should be able to largely rely on current methods for calculating the actual fund charges for their fund updates when calculating the total fees amount.”

But it said it relied on approximations rather than true costs and was not the most accurate method.

Paul Gregory, the FMA’s director of external communications and investor capability, said reporting the dollar amount would improve the information given to KiwiSaver members.

“The annual statement offers a unique opportunity for providers to engage with their investors, and help them make good decisions about their investment.

“We discovered in our survey last year that KiwiSaver investors do read their statements and have a strong appetite for information that helps them to make decisions. Investors told us that one of the pieces of information they wanted to see is their fees in dollars.”

 

There are calls for the Government to give KiwiSaver providers a set deadline to divest from companies involved in the manufacture of cluster bombs, landmines and nuclear weapons.

Four default providers – ANZ, Westpac, Kiwibank and Mercer – still have exposure to the industry despite a furore last year that drew public attention and condemnation to the investments.

Jacqui Dean, Minister for Commerce and Consumer Affairs, has said she expects KiwiSaver providers to drop their investments but has not said when.

The Green Party said that was not good enough.

“The National Government’s weak approach is letting too many KiwiSaver providers off the hook for behaviour that is unethical and possibly illegal.

“Parliament’s intention was clear when it passed a law banning investment in companies producing cluster bombs in 2009.”

Westpac has announced BTNZ, manager of the Westpac KiwiSaver Scheme, was already working to exclude exposure to munitions and tobacco across all KiwiSaver funds. The process is expected to be complete by the end of the year.

A spokeswoman for ANZ said its investment exposure was small.

“We completed full divestment of any direct investments by our funds in controversial weapons and tobacco in September last year,” she said.

“None of ANZ’s KiwiSaver funds invest directly in these types of companies.  We will be confirming details in the next few weeks of a new investment solution which will ensure there is also no indirect investment in these kinds of companies for members of our ANZ Default KiwiSaver Conservative Fund – none of the other funds have any indirect investments in these companies.”

She said the default fund still had some passive holdings because it invested in international equities via a passive index tracking fund.

“These holdings will shortly be transitioned to a fund managed by us to ensure that we have the flexibility to make further changes that our investors might want.   It’s been important to take the time to develop a future-proofed solution as we recognise that investor views on ethical investing will continually evolve and we want to ensure that we can continue to deliver the best possible investment performance for our members as changes are made.”

Sam Stubbs, head of new low-cost KiwiSaver provider Simplicity, said the funds should be suspended until they can exit their investment in banned weapons’ makers.

He said they had had enough time to make the change.

Simplicity uses the new Vanguard clean screen offer – a new global equities index fund that does not have exposure to cluster munitions, nuclear weapons-associated firms or tobacco.

BNZ today announced it would drop investments in companies involved in the production of cluster munitions, anti-personnel mines, nuclear weapons and tobacco or tobacco products.