The amount of money people had in KiwiSaver funds reached 25% of gross domestic product (GDP) at the end of March, the annual KiwiSaver report from the Financial Markets Authority Te Mana Tātai Hokohoko shows.
That landmark wasn’t to last, and in the following six months, rising inflation, and rising interest rates, sent share and bond markets, and KiwiSaver balances, into reverse.
But despite KiwiSaver balances falling, Paul Gregory, the FMA’s director of investment management, said savers were holding their nerve, and not panic-switching into lower-risk funds.
“The amount of switching activity, even in this extended volatility is way down on what it was in the V-shaped Covid bump that we had,” Gregory said.
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In the V-shaped “bump”, markets crashed in March 2020 as investors panicked over the uncertain impact of the Covid-pandemic, only to watch markets rebound as governments and central banks propped up economies around the world.
Gregory said the relatively low level of switching between funds indicated savers had learned to stay resilient despite market volatility.
“That’s an encouraging sign there’s a bit more resilience and maturity overall in the membership base,” he said.
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Each year, the FMA reports on the state of KiwiSaver, but the 12-month period covered by the reports, ends on March 31.
At the end of March, the latest report published on Tuesday shows, there was $89.7 billion in KiwiSaver funds, compared to the country’s annual GDP of $360b.
But after March global sharemarkets fell, and by the end of June, funds researcher Morningstar calculated that the KiwiSaver funds it tracked contained just $82.8b, though it tracks a slightly fewer KiwiSaver funds than the FMA.
Many popular growth funds lost large amounts as markets fell. In the 12 months to the end of August, Simplicity’s growth fund was down 10.53% before tax, and ANZ’s growth fund was down 10.74%.
Even in the 12 months to the end of March, investment returns were low compared to the previous 12-month period, the FMA said, down from $13.2b to $1.3b.
As a result, the Inland Revenue collected $256.6m in tax from KiwiSaver, well down on the $474.7m it collected in the previous period.
But KiwiSaver providers continued to profit as the amount they earned in fees increased again.
The average KiwiSaver paid $245 in fees, up from $240 the previous year, despite lower investment returns.
123RF
Falling share and bond prices reduce KiwiSaver fund values.
The total fees charged were $703.6m, compared to $657m the previous year.
While most savers held their nerve as markets wobbled, some did switch an extraordinary number of times, the FMA’s report showed.
Just under 4300 savers switched between KiwiSaver funds four or more times in the 12 months to the end of March, and Gregory doubted those calls had all profited them.
“You would have to be a hedge fund manager to pick funds that well,” Gregory said.
During the period covered by the report there was a reshuffle of default funds, into which savers who do not choose a fund are randomly allocated.
ANZ, ASB, Mercer, AMP and Fisher Funds lost their default status, and their default savers were transferred to the remaining default providers BNZ, Westpac, Simplicity, Booster, Smartshares and Kiwi Wealth.
That saw over 230,000 savers shifted to a new provider, as well as default funds being changed from conservative to balanced funds.
