KiwiSaver

Generate and Milford had the largest percentage gain in KiwiSaver funds under management in the December quarter, new data from Aon shows.

It has released its KiwiSaver report for the December 2015 quarter.

Total funds under management have increased by 5.4% over the quarter, well in excess of the growth due to investment gains.

Generate’s funds under management increased 37.6% over the three months and Milford’s 10.8 per cent.

AMP and Mercer had the smallest gains, at 4.2 per cent and 3 per cent, respectively.

The $1.5 billion of additional funds was spread across all asset classes – with the exception of the category that includes includes alternative assets.

The allocation to alternatives fell by $22 million, from $528 million to $506 million.

Alternatives now make up just 1.7% of KiwiSaver assets, down from 1.9% three months ago.

Aon said that was low by international standards. “According to the latest Willis Towers Watson (WTW) annual survey global pension funds allocate on average 24% of their assets to alternatives.”

The survey made it clear that banks were still dominant. ANZ, ASB and Westpac have nearly 60 per cent of the KiwiSaver funds under management.

Growth funds performed best over the quarter, with the median growth fund returning 3.7% after fees and tax. The median conservative fund returned 1.2%.

It is a similar story over the last 12 months – the median growth fund returned 7.7% and the median conservative fund 4.2%.

The best performing fund over 2015 was the Generate Focused Growth Fund (13.6%, after fees and tax). The NZ Funds Income Fund provided the lowest return at just 1.0%.

Milford has amassed more than $500 million in its KiwiSaver funds.

It ended 2015 with $523 million under management from 13,330 members.

Milford said its members had the highest average balance of any large KiwiSaver provider, at $39,230 compared to $11,950 for members across the scheme.

“Milford’s main objective is to achieve the highest possible return for KiwiSaver investors while also actively managing investment risk. We have a strong and experienced investment team of 14 based in Auckland and Sydney who are highly motivated to achieve this objective,” managing director Anthony Quirk said.

“KiwiSaver members need to be far more aware that investment returns matter. An additional 1 per cent return per annum over a long investment horizon can be far more significant than many people think,” he said.

“For example, a 35 year-old who achieves just 1 per cent higher investment returns across this 30-year period, could add over $100,000 more to their KiwiSaver retirement pool.”

ASB has generated a new KiwiSaver calculator projecting the savings Kiwis could have to draw on when they reach retirement.

ASB’s KiwiSaver calculator allows KiwiSaver members to take charge of their own KiwiSaver savings, demonstrating how slight adjustments to contributions and fund selection can impact total KiwiSaver savings available at retirement.

ASB’s quarterly ASB KiwiSaver Scheme survey reveals 61% of people believed they need to save more for retirement, with the largest proportion believing they will require $30,001 – $50,000 each year of retirement.

Three-quarters of respondents were not sure how long they will be retired for, but those that did estimate it would be around 22 years.

ASB general manager of wealth Jonathan Beale said while many New Zealanders were now enrolled in KiwiSaver, continuing to educate people about how it worked and whether they were on track to meet their retirement goals and sustain their lifestyle was essential.

“It’s easy to enrol in KiwiSaver and forget that it’s actually an investment that needs to be monitored and regularly reviewed, particularly as personal situations change. In many cases contribution amounts are circumstantial, and what was suitable at 25 is often vastly different at 45,” Beale said.

Making regular contributions and understanding the various investment options available were among the best ways to maximise the amount of money available at retirement.

In conjunction with the calculator, ASB will be releasing a series of communications, targeted at educating customers around making the most of their membership in KiwiSaver.

ASB’s KiwiSaver calculator is the latest addition to the suite of online ASB KiwiSaver Scheme tools that enable members to self-manage their retirement savings. These include fund-switching facilities, investor profiling and the ability to top up your ASB KiwiSaver Scheme account directly. Members can also convert True Rewards dollars earned on an ASB credit card into ASB KiwiSaver Scheme contributions.

“The great thing about our calculator is that it gives members ownership of their KiwiSaver savings, enabling users to look ahead and see how much income KiwiSaver could potentially deliver them in retirement,” Beale said.

“A few simple calculations will demonstrate the difference in the end-amount when the fund option is changed, the regular contribution rate is increased and one-off contributions are taken into account.”

All existing and new KiwiSaver members can use ASB’s KiwiSaver calculator.

KiwiSaver’s first-home withdrawal function is a practical solution and a reflection of the reality of New Zealand house prices, providers say.

Members are able to withdraw some or all of their KiwiSaver funds to purchase a first home after at least three years’ saving.

That has been criticised in the past by those who said it worked against the aim of the KiwiSaver product, which is to provide money to help fund retirement.

As more people buy homes later in life, they have less time to recover from wiping out their retirement savings to fund a deposit.

In 2013, AMP said the Government should review the first-home scheme.

It argued savers should only be able to withdraw any savings they have made above the minimum salary contribution.

“The first-home withdrawal feature of the KiwiSaver scheme is incongruent with the concept of a long-term retirement savings vehicle,” AMP wrote in a submission to the Ministry of Business, Innovation and Employment on the KiwiSaver default fund system.

But AMP’s general manager of investments and insurance, Therese Singleton, said she believed it was a necessary function of the scheme.

“You’ve got to remember that before we had KiwiSaver, we had nothing. It allows people to experience the value of saving and it’s reflective of the reality, particularly in the Auckland market, of how hard it is to save for the down payment on a house. While it’s not purist the sense it is a retirement savings scheme, it does have a lot of value in educating people on the value of saving.”

She said it was then up to the provider to ensure they continued the relationship with people who withdrew money, so they would not stop saving once the house was bought.

David Beattie, of Grosvenor, agreed. He said it might encourage some people to join and it was likely that they would start contributing again once they were in their first home.

“On balance it’s not a bad function. If they did not have KiwiSaver, they would be saving frantically in another vehicle and not contributing anyway, at least this way they get top-ups and tax credits. It establishes the discipline.”