KiwiSaver

KiwiSaver members will be offered the chance to invest in hedge funds by a new player in the market, Generate KiwiSaver.

It registered its prospectus on Friday.

Generate KiwiSaver is run by Generate Investment Management,  headed up by former Huljich Wealth Management investment manager Henry Tongue. Directors include Warren Couillault, formerly of Fisher Funds.

The scheme will invest in 10 to 15 fund managers globally,who are focussed on making money in up and down markets. Some would be hedge funds.

The scheme’s fees will be higher because of the cost of using other fund managers.  The scheme will offer conservative, growth and focused growth options.

AMP has announced plans to transfer its AXA KiwiSaver customers to the AMP KiwiSaver Scheme as it moves toward having a single scheme.

Under the terms of the proposed transfer, which has to be approved by the Financial Markets Authority, all existing AXA KiwiSaver Scheme customers will be transferred to an “enhanced” AMP KiwiSaver Scheme.

It is expected customers will receive a comprehensive transfer pack in May including full details of the proposed transfer process, which is expected to be complete by late July or August subject to necessary approvals.

AMP Financial Services manager director New Zealand, Jack Regan, said the consolidated scheme would adopt the AXA style multi-manager investment approach to “enhance the overall fund performance”.

Following the merger, AMP has access to AMP Capital’s New Zealand Multi-Asset Group and a review of AMP’s funds is under way.

“After that review is complete in May, we’ll send our customers more information about the refreshed AMP KiwiSaver Scheme, and it is expected this will include advice on product enhancements, such as a revised investment approach and reduced fees,” Regan said.

From tomorrow the IRD will suspend the provisional allocation of default customers to the AXA KiwiSaver Scheme and the scheme will be closed to new customers.

AMP has more than 260,000 KiwiSaver Scheme customers across its two KiwiSaver Schemes and 18% of KiwiSaver funds under management.

“With our core focus on investment, our extensive network of professional qualified advisers, and the scale to invest in product and service development to meet the needs of customers, AMP is well positioned for ongoing leadership in KiwiSaver,” Regan said.

“We are focused on helping to educate our KiwiSaver customers, especially those in default options, to choose the investment options that best match their individual circumstances and risk appetite, and AMP is very active in that regard.”

There is still work to be done to help people feel confident about setting a plan for their KiwiSaver accounts to achieve their retirement goals, ANZ says.

Retirement savings confidence has dropped among young people but remained flat overall at 47%, according to ANZ’s latest Retirement Savings Confidence Barometer.

Among those who are saving, more than half say that KiwiSaver is their primary savings vehicle, while 13% are counting on investment property.

Those with diversified assets including property and managed funds were more confident.

“We are finding that a lot of people have been ticking the box to join KiwiSaver but then they are not taking further interest in how it can help them meet their goals,” ANZ’s managing director of wealth and private banking in New Zealand, John Body, said.

“Many don’t know what investment fund they are in, despite regular communications. These responses are similar whether people have been automatically enrolled at the workplace into a default scheme or actively joined themselves.

“KiwiSaver is still relatively new and it has already made a positive impact for people who have never saved before, but there is still plenty of work to be done to help people gain confidence in setting a plan and achieving their retirement goals.”

The survey showed there was a big difference in the confidence levels of men and women. It said 56% of men were confident of being able to reach their retirement savings goals, compared to just 39% of women.

Swapping KiwiSaver default funds for “life stages” settings wouldn’t be in the best interests of investors or the scheme, oppponents say.

Submissions to the government’s review of the default provider system have been mixed on the idea of adjusting default fund members’ asset allocation according to their age.

Supporters include default providers OnePath and Mercer, which said age-based defaults were common in the US and UK and recommended by the OECD as suitable strategies for pension plans.

Fisher Funds also supported this approach, saying that if the Government regards itself as a “de facto investment adviser” then it should act consistently with investment industry best practice. 

“In other words, the level of short-term risk and volatility the Government should be willing to impose on default members needs to be in line with that of a best practice investment adviser.”

But default provider AMP opposed such a change because it would upset novice investors.

“Current default asset allocation requirements generally go against recommended portfolio construction for long-term investing,”  it said.

“However, low levels of investor literacy often results in concern and erosion of confidence in the system when experiencing any short-term negative return. To maintain confidence, and therefore contribution levels, a more conservative default option should be continued.”

Authorised Financial Adviser Austin Fisher said adopting a life stages approach would be a step too far.

“My view is that the KiwiSaver providers who are keen to encourage members into growth funds should take the initiative to actively convince members. They do this by using their own resources and expertise to state a compelling case.

“This proposal seems to rely on a Government-sanctioned system to help do that work for them.”

The Trustee Corporations Association (TCA) said KiwiSaver default funds should continue with their conservative approach with a focus on preserving capital.

“It should not try to maximise the member’s returns or savings over the longer term.”

The TCA also said there would be a risk of public confidence in KiwiSaver being damaged if there was a change to the objectives of default funds.

The Retirement Policy and Research Centre said each default provider should be allowed to make its own decision about the default investment option with no official constraints.

“There seems no compelling reason for the government to set the default investment option, as it does now,” the RPRC said.

“In fact, it has no expertise on this topic yet, by becoming involved in this process, the state is representing itself as ‘knowing’ what is appropriate for a very large and disparate group of members.”