Banks get the biggest slice of KiwiSaver cake
Savers need to make sure providers are not taking too much risk, writes Martin Hawes.
If there was going to be a celebration for the KiwiSaver’s 10th birthday, it would be the banks who would party hardest.
According to research house Morningstar, just six providers (mostly banks), have around 85 per cent of the KiwiSaver market that is on the Morningstar database. That should be worth a pallet load of champagne on the top floor of bank buildings in Sydney and Melbourne.
The rest of us can also enjoy a quiet tipple. There are many of us who now have some savings and those savings are growing well courtesy of Government and employer subsidies, good returns, and of course, our own contributions.
People are starting to sit up and take notice of their KiwiSaver accounts. The average amount in a KiwiSaver account may be just $14,000, but many KiwiSavers are children and others who just signed up for the $1,000 kick start. There are a lot of people with more than $14,000 in KiwiSaver.
As balances grow, so too does the amount of involvement and concern. At seminars and talks I have done around the country, I have noticed many people are more interested in their KiwiSaver accounts – and they are starting to switch providers.
However, in the first decade, banks have grabbed the bulk of the market share: it is easy to sign up with your bank. And KiwiSaver is quite ‘‘sticky’’, meaning that there is inertia – people tend to stay with their bank despite any reservations.
Banks have done well from KiwiSaver, regardless of whether their funds are good, bad or indifferent.
But KiwiSaver has not yet been tested by a major market fall. Noone knows what people will do when they see their KiwiSaver balances sharply reduced by a market crash. Will they panic and stop contributing? I hope not.
KiwiSaver started at the perfect time, just before a major market crash. Balances were low when markets fell, so no-one much cared. Since the GFC ended, markets have recovered strongly and there have been good returns.
One day of course, this investment summer will end. You need to make sure you are positioned correctly and your provider is not taking too much risk with your money. Investors need to keep one eye on risk.
At this 10th birthday, it is time to pay attention to what you have and ask if your KiwiSaver is positioned well for whatever the markets throw at you, both the good and the bad.
KiwiSaver is real money and it is your money. A significant birthday should be time to have a good look at what your money is doing.
Martin Hawes is the chair of the Summer KiwiSaver Investment Committee. The Summer KiwiSaver Scheme is managed by Forsyth Barr Investment Management Ltd and the Scheme’s product disclosure statement is at summer.co.nz. Martin is an authorised financial adviser.