KiwiSaver competition heating up

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Competition between KiwiSaver providers is intensifying as the growth in new members slows, a new analysis by the Financial Markets Authority suggests.

Wednesday, October 24th 2012, 6:48AM

by Niko Kloeten

The FMA’s annual KiwiSaver report, which covered 50 schemes, showed that in the year to March nearly $750 million was transferred between schemes, including just under $50 million transferred out of default funds.

Overall the scheme’s funds under management (FUM) exceeded $12.73 billion as at March 31, an increase of $3.56 billion in the past year
The largest contribution to the increase in FUM was member contributions of $1.33 billion, closely followed by Crown contributions/fee subsidies of $1.06 billion, and employer contributions of $865.7 million.

Income from investment of scheme assets represented $449.9 million, or 9.7% of the total income for the annual return year.

As at March 31 there 1.91 million members of KiwiSaver schemes, a 14% increase on the previous year.

FMA chief executive Sean Hughes said the number of KiwiSaver members has since exceeded two million, and people need to take a long term approach to their investment.

“Our desire is for members to make decisions based on their life stage, age and personal circumstances which will leave them in the best financial position when they reach NZ Super age,” Mr Hughes said.

“The type of KiwiSaver portfolio for someone in their 20s will be different from someone in their late 40s. It’s never a bad time to reassess your investment options in consultation with your KiwiSaver provider and your financial adviser.”

The report found that the largest item of expenditure over the year was fees, amounting to a total of $129.0 million across all schemes.  Investment management fees made up the bulk of this figure ($69.2 million), followed by administration fees ($56.6 million) and trustee fees ($3.2 million).

The second largest item was taxation ($90.2 million), while other scheme expenses accounted for $8.44 million.

During the year $28.9 million was withdrawn due to financial hardship, which FMA said reflected the weaker economic climate following the Global Financial Crisis (GFC), and also the effect of the Christchurch earthquakes.

Almost double that amount ($57.2 million) was withdrawn for first home purchase, showing the popularity of that feature of KiwiSaver.

The report also noted that over the next five years, it is estimated that 155,000 KiwiSavers will reach retirement, and approximately $2.3 billion in assets could be unlocked from KiwiSaver schemes.

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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