KiwiSaver

Three-quarters of all KiwiSaver members have no idea how much money they will have in their accounts when they reach retirement, a new survey shows.

The survey of 781 members, commissioned by Kiwi Wealth, shows 77% of people do not know what their account will be worth when they hit 65.

But more than half estimate they will need between $400 and $600 a week to live on, after tax.

Another 27% did not know what type of fund their KiwiSaver account was in and 31% had never reviewed it. Women were more likely to have not made any changes.

Almost 40% of those aged under 25 did not know who their provider was.

More than 60% expected to get NZ Super when they retired.

Joe Bishop, Kiwi Wealth head of retail wealth and marketing, said there was a large gap between people’s retirement income expectations and the amount they needed to save to achieve it.

“For an initiative designed to encourage retirement savings, it’s alarming that 77% of KiwiSaver members don’t know how much will be in their account when they retire.

“It’s likely that many are seriously overestimating how much it will be, and seriously underestimating how much they’ll need to have the retirement lifestyle they hope for,” he said.

“Half of the KiwiSaver members surveyed thought they would need $400-$600 a week to get by when they reach retirement age. Massey University research shows that even for a ‘no frills’ retirement, someone living in a metropolitan centre will need $490 a week.

“Current New Zealand Superannuation for a single person is around $370 a week, so there is a shortfall that needs to be bridged by KiwiSaver.”

He said the survey showed many members were not taking enough action on their KiwiSaver accounts and could be missing out on money in retirement.

“The prevailing sentiment appears to be that many people approach their KiwiSaver accounts like bank accounts when they should be thinking about them as investments. Many of these accounts are lying ignored in default funds which may not be performing as well as other funds more aligned to the customers’ risk profile and investment timeframe.

“Too many KiwiSaver members are short-changing themselves.  They need to be more involved with their investment and make informed decisions,” Bishop said.

“The onus, too, must be on KiwiSaver providers to engage more with their customers and help them make good decisions for their investments.  That’s the best way for KiwiSaver members to increase their wealth.”

Pie Funds is shelving plans to launch a KiwiSaver scheme, for now.

It had been reported that the fund manager was working on a KiwiSaver scheme to launch this year.

The Australasian small-cap specialist manager had said it wanted to get enough funds under management before launching the product.

But head of client services Sam de Court said that had now been put on the back-burner.

“We haven’t decided not to do it but we’ll put off planning until 2017. We’re quite busy growing the business at the moment.”

He said Pie Funds had decided to focus on its other areas of growth. “KiwiSaver would be a huge undertaking and we don’t need that distraction.”

Pie has grown its funds under management from $200 million in 2015 to $350 million today.

Last year, Pie launched a new fund, Growth 2, which focused on small and medium-sized Australasian companies that offer value and growth.

It had been reported that fund was something that a Pie Funds KiwiSaver scheme could invest into.

But de Court said it made sense to focus on that fund and other areas of growth in the business for the time being.

Pie Funds’ best performing fund in 2015 was its Emerging Fund, which returned 41.7% over the calendar year for the $56.3 million invested.

That was followed by its Growth Fund, which returned 24.7%  but is up 337.5% since inception.

Newcomer Growth 2 is up 9.7% since its inception and down 1.6% month on month. It returned 14.1% through 2015 and has $40.5 million invested.

Ethical investing is a growing trend and one KiwiSaver Scheme believes its Responsible Investment Association Australasia (RIAA) certified socially responsible investment (SRI) funds will drive business.

Grosvenor’s two SRI KiwiSaver funds became the first to gain certification under the RIAA’s recently revamped certification standards last week.

SRI funds, which don’t invest in companies that trade in such things as alcohol, tobacco, gambling and fossil fuels, have been around for a while.

However, as the global drive towards more ethical practices is growing, so too is the desire among some investors for such practices and funds.

Grosvenor chief executive David Beattie said they have had a very positive response to their SRI funds and he would expect that to increase with the RIAA certification.

“A particular subset of investors is dedicated in wanting to follow their ethical beliefs through into their investment practices.

“We think this certification will encourage such investors.”

Investor interest in SRIs has grown significantly since fossil fuel companies have been filtered out, he said.

After applying fossil fuel filters to their funds, 30 companies were dropped off the Grosvenor SRI funds register.

“There has been a good response to that. Such SRI strategies are only getting more popular and more attractive to investors.”

Beattie added that, on a broader scale, many investors are still getting their head around ethical investing.

“But both our analysis and RIAA analysis show it a growing trend globally.

“So we are optimistic that growing numbers of New Zealand investors are going to be attracted to SRI funds.”

Grosvenor is the only KiwiSaver provider with SRI funds certified by the RIAA. It already has three RIAA certified “Investment Series” SRI funds.

The RIAA, which is an Australasian body, is building its RIAA certified product list into a fund-finding web tool that is scheduled for launch in mid-2016.

A KiwiSaver provider offering members the ability to pick the assets their retirement savings are invested in says only a small percentage of investors want to take such a hands-on approach.

NZX-owned Superlife gives investors more control of their KiwiSaver accounts, if they want it.

As well as funds that will be familiar to most KiwiSaver members, such as a life stages option that de-risks the investment as the saver gets closer to retirement, and a fund designed for those saving for a first-home deposit, Superlife also offers investors a more active option.

Those who want to create their own investment strategy can use 14 sector funds to do so.

Investors who want to get to a more detailed level can use 23 exchange-traded funds to create their own portfolios,  the same range on offer from Smartshares,which is also owned by NZX.

Superlife founder Michael Chamberlain said: “Superlife is a vehicle that allows you to implement what you want to do in a cost-effective and efficient way. We are not trying to sell you a product, we are just providing a vehicle and equipping people with education and information.”

But he said the appeal of the option would probably always be limited.

Only about a third of KiwiSaver investors would want something that was not mainstream, he said.

“Out of 100 people, 85 aren’t going to be interested, don’t have the confidence and want to be told what to do, to be able to opt out and leave it to someone else. Of the remaining 15 I would expect two or three to really want to build a portfolio. Ten might want to put together their own strategy , the others don’t know what they want, they just know it’s not standard.”

But he said there would be growth.

“Not necessarily because of investor education improving because generally across New Zealand I don’t think it does improve but within New Zealand people are coming into the workforce, others are retiring. As balances get bigger people tend to take more notice. Many people still won’t be interested because they prefer to leave it, to trust the experts.”

Self-managed super funds have been an area of growth in Australia. 

Chamberlain said there was always a risk that investors would do something ill-advised with their investments, such as cementing losses by moving out of equities during periods of market volatility.

But he said Superlife had a clear philosophy communicated to its members that if they were investing money in the sharemarket it should be money they did not plan to spend within the next 10 years.

Chamberlain said Superlife dealt with advisers who catered for clients on a fee-only basis but because it did not pay commission, was not marketing widely to them.