It’s been a tough few months for many KiwiSavers. Sharemarket falls have hit retirement nest eggs with $4.5 billion wiped off the value of funds in the year to March. Meanwhile, what we pay in fees has continued to rise, topping $479 million in 2019.
If you’ve got your KiwiSaver funds invested with AMP, ANZ or ASB, you’ve got other grounds to feel miffed. The three companies, among the biggest KiwiSaver schemes, scored below average in our latest customer satisfaction survey.
If you want better service, you’re more likely to get it from the smaller players.
Note: Our annual KiwiSaver survey was conducted before the current sharemarket drop following the Covid-19 crisis.
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KiwiSaver has been running for more than a decade but our annual surveys show consumers still face big information gaps.
With 27 providers and more than 250 funds, KiwiSaver can be a tricky market to navigate. Not surprisingly, many consumers find it hard to compare schemes. Just 24% thought comparing providers was very easy.
In addition, 47% felt they didn’t have access to sufficient independent information and advice to help make decisions about their investment, or didn’t know what was available. That’s been a consistent finding of our survey for the past five years.
Many are also unsure about how their fund is managed.
Most KiwiSavers (76%) didn’t know what they paid in annual fees. Two-thirds were also unsure how their fund performed relative to the rest of the market.
Just 18% felt sure their KiwiSaver funds would be enough to support them in their retirement.
KiwiSavers aren’t just worried about returns and fees. Many also want to know more about where their KiwiSaver funds are invested.
About half (49%) said they wanted a fund that provided a good return but also invested ethically. Another 14% put ethical investment ahead of returns.
Despite the appetite for responsible investment, many felt it was difficult to find out where their money was going.
As we’ve found in previous years, the majority said they’d be concerned if their money was supporting sin stocks, such as gambling, pornography or tobacco. But most didn’t know whether their fund manager excluded investment in these areas.
Six out of 10 KiwiSavers said they’d be very concerned if their money was invested in weapons but didn’t know whether their cash went into this industry. Investments in nuclear power and palm oil were also a major concern for half of investors.
Overall, just 24% felt sure their cash was invested responsibly.
Where do you stand?
Who’s keeping watch?
The Financial Markets Authority (FMA) is promising to keep closer tabs on the industry and what it’s delivering for consumers.
That pledge comes as companies’ income from fees continues to rise.
In 2019, KiwiSaver providers earned $479.8 million in fees, up 15% on 2018. Research commissioned by the FMA suggests what we’re paying is high compared with similar funds in the UK.
Last year, FMA director Liam Mason said it would be asking providers “to demonstrate how they are providing value for money for members”.
Mr Mason said this would include getting providers to explain “how higher fees are justified for services such as active fund management or responsible investment strategies”.
As our survey shows, higher fees haven’t translated into quality customer service.
Where's your money going?
Finding out which horses your KiwiSaver cash is backing isn’t as straightforward as it could be.
KiwiSaver providers must regularly disclose the top 10 investments of each of their funds. They also have to file financial statements and lists of fund holdings showing where money is invested. These returns are held on the Companies Office Disclose Register. But in many cases, the information doesn’t tell you everything you need to know. Most schemes invest in global tracking funds, which means you need to dig deeper to find where these funds invest.
It’s a safe bet the majority will have holdings in stock exchange leaders and big name companies – think Apple, Microsoft, Facebook, BP, ExxonMobil,
Shell, Nestle, Coca-Cola, PepsiCo and McDonald’s among others.
The online Disclose Register is free to access, although you need to know where to look for relevant information. To find your KiwiSaver fund’s holdings, search under “Offers” and enter the name of your provider. A list of “Full portfolio holdings” can be found under the “Investment Options” tab.
You’re entitled to ask your provider where it’s investing your money. Quiz your fund manager about its approach to responsible investment. Look for details on industries the fund screens, rather than general commitments to do the right thing. You can also ask what the fund is doing to support sustainability investing.
Nine KiwiSaver funds are promoted as dedicated responsible investment options:
AMP’s Responsible Investment Balanced Fund
ANZ’s OneAnswer Sustainable International Share Fund
Booster’s Socially Responsible Investment Balanced Fund, and Socially Responsible Investment Growth Fund
CareSaver's Balanced, Conservative and Growth funds
QuayStreet’s Balanced SRI Fund
SuperLife’s Ethica Fund.
These funds exclude a broader range of investments than the companies’ other KiwiSaver offerings. Common exclusions include alcohol, arms, gambling and pornography. Investment in fossil fuel extraction is also excluded by Booster, QuayStreet and SuperLife.
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