Banks win the KiwiSaver war
The big banks are caning it in the battle for KiwiSavers' hearts, successfully wooing many away from their non-bank rivals.
Bank of New Zealand was the biggest winner in the switching fight, attracting a net $176.3 million transfers into its scheme, though that was over a 15 month period to the end of March compared with the 12-month reports from other providers.
BNZ was a latecomer to KiwiSaver, but is wasting no time in encouraging its customers to shift their accounts to the bank's scheme.
ANZ was another big winner with a net $1.393b transferred into its main scheme from other schemes, though that is less impressive than it first sounds as on April 1, 2013, the National Bank scheme was shut. ANZ bought the National Bank in 2003, and the vast bulk of the $1.25b transferred out of the National Bank scheme went to ANZ.
ANZ also operates the ANZ Default scheme (previously called Onepath KiwiSaver), and the OneAnswer (previously called SIL KiwiSaver) schemes.
Kiwibank's two schemes - Kiwi Wealth (the old Gareth Morgan scheme) and the Kiwibank scheme (now no longer being sold) - had a combined net transfer of $107.6m.
Westpac's net switches were worth $56.3m, while ASB's giant scheme saw evenly matched inflows and outflows, netting just $10.7m.
Just where the banks are winning business is clear: the non-bank schemes are leaking members.
Mercer's two schemes saw just under a net $75m of funds transfer to other schemes, while Fisher Funds Two schemes (it bought Tower's) had total net outflows of nearly $87m.
AMP appears to have lost more than those four schemes combined, just short of $200m. AMP was operating two schemes, but closed the AMP Wealth scheme, which saw a one-off transfer of $1.02b into its main scheme.
Around $20m of funds was transferred in that closure to schemes other than the AMP one, indicating some KiwiSavers took the opportunity to head to other providers.
The main AMP scheme saw just over $175m of member funds transfer to others.
David Beattie, chief investment officer of the Grosvenor KiwiSaver scheme, which saw net positive transfers in, said the banks' staff were selling KiwiSaver to customers at every possible opportunity.
"The banks have dominated the flows in because they are using their relationships with their banking customers," he said. "They often have the opportunity to get in front of them, and are using the ‘Do you want fires with that?' approach. They always mention KiwiSaver."
They can also use bribes, he said.
"Sometimes they will offer a fee discount. If you move everyone [in a family] across, they will sometimes waive the membership for the kids."
Beattie also suspected some transfers were the result of KiwiSaver "chasing past performance" by shifting to funds with better recent performance, though this seems to be a more minor trend.
Much of the money being transferred out of the big schemes comes from the default funds into which people were put by the IRD because they failed to choose a fund themselves.
Of the money that was transferred out of the Mercer scheme, nearly $70m of it was from the conservative fund. Similarly, of the money that was transferred out of ASB's scheme, over $100m was in the conservative fund.
That raises hopes some people might be shifting to higher-risk, higher-return funds more suited to a lifetime of saving. However, looking at transfers into the BNZ scheme, showed a third still ended up in a conservative fund.
While there was a lot of switching between schemes, there seems to be a lot less in the way of switching funds within schemes.
Mark Brighouse, from Fisher Funds, said it appeared when people had made an active choice of KiwiSaver scheme and fund, they were adopting a "set and forget" strategy. Where there was switching, it appeared to be good switching, he said.
"Switching patterns are encouraging, because the majority of people are moving into funds with greater growth assets, from the very conservative funds they were defaulted into."
Schemes like Fisher Funds actively educate members to make informed choices, so over time more KiwiSavers should end up in funds with risk profiles suited to their needs.
- Sunday Star Times