KiwiSaver has continued to grow despite market volatility and economic uncertainty caused by COVID-19 , according to the Financial Markets Authority’s (FMA) KiwiSaver Annual Report for the year ended March 2020.
Total funds under management increased 8.7% to $62 billion, compared to 2019 when total assets grew by 17%. Meanwhile, total membership increased 3.1% to 3 million, the same growth rate as 2019.
Many KiwiSaver funds dipped after world markets experienced a sharp decline in the beginning of March 2020. Over the year, KiwiSaver investment returns fell 122% from $3.8 billion to -$820.9 million, this decrease followed several years of double-digit growth in investment returns. Since the end of March markets have recovered.
Liam Mason, FMA Director of Regulation, said COVID-19 was KiwiSaver’s first big test since the Global Financial Crisis, and the scheme has proved resilient.
“The report shows that despite the market losses in March that severely impacted investment returns during the period, KiwiSaver continued to grow due to the contributions from members and employers.
“We have acknowledged the efforts providers made to support their customers through the heightened period of volatility. We’re keen to see providers continue this level of engagement and encourage more informed decisions about switching funds and understanding market volatility.”
“The role of KiwiSaver in our lives and the economy is continuing to grow, with more than $2.5 billion withdrawn this year for retirement and first home purchases,” said Mr Mason.
FMA focus: fees, annual statements Mr Mason said while most fund balances grew over the year due to contributions, fees were brought into stark relief because members would have likely seen negative returns for the first time.
The FMA’s focus on fees and value for money put providers’ investment management styles under the spotlight with an independent report by MyFiduciary.
“The report into active and passive management styles is an important first step in examining the value proposition of providers and the level of fees being charged for the management style they offer. While most funds were found to be ‘true to label’, the level of ‘activeness’ varied widely,” said Mr Mason.
“We are talking with providers about the results of the report and will consider our next steps in our focus on value for money. We will also be providing guidance on the requirement that fees should not be unreasonable.”
An FMA survey found that significantly more members noticed the fees in their annual statements this year.
The FMA also highlighted the changes to annual member statements this year with an integrated campaign to prompt people to take a “Looksee” at the new information on retirement projections.
Default members Nearly a quarter (690,000) of KiwiSaver members remain in default, conservative funds and approximately 380,000 of these members have not made an active choice to stay there. This year, 43,123 default members made an active decision about their fund, down on the 52,289 in the previous year.
Mr Mason noted that while the number of active choices by default members had reduced over the last twelve months, this trend has been improving over the last few years. “We will be watching with interest to see how these numbers change over the next 12 months while the default providers go through the tender process for new appointments in 2021.”
Watch Liam Mason discuss the KiwiSaver 2020 annual report
