Investors keep piling into KiwiSaver funds

KiwiSaver's dominance of the "ma and pa" investment scene shows no signs of relenting, with the voluntary savings scheme driving a positive $698 million funds inflow during the September quarter.

But while KiwiSaver's 33 scheme providers shared net inflows of $912m – bolstered in no small part by the Crown's annual injection of member tax credits – it was a cash PIE product offering from Kiwibank that bagged the most dollars.

According to a quarterly overview of the retail managed funds sector by funds assessor FundSource, Kiwibank's cash PIE term deposit fund netted over $120m of investors' cash during the three month period to seize top spot for net inflows into a single fund.

Kiwibank's wealth general manager Tracey Berry said the tax incentives gained by high income earners through the portfolio investment entity (PIE) regime made its products attractive when investment confidence was still brittle and term deposits rates were low.

The PIE regime creates tax advantages for investors because the maximum prescribed investor rate is 30 per cent, very attractive to investors who are on a 39 per cent or 33 per cent income tax rate.

"Sharemarket and finance company collapses created an environment where an already conservative investment appetite became even more conservative and typically the benefactors were the banks," said Ms Berry.

"We've also done plenty to try to raise awareness of the PIE vehicle and strength of the Kiwibank brand and that's worked very well. Certainly we've grabbed more than our natural market share and we hope we can continue that."

The $120m inflow followed a near $140m gain during the June quarter; Kiwibank has now amassed over $1.07 billion in its two cash PIE funds since their launch in June 2008 – 80 per cent of which sits in the cash PIE term deposit fund.

The government-owned bank has increased the number of its wealth advisers from four to 10, although Ms Berry said recent market rallies could attract people away from cash PIE funds.

"Market dynamics are always changing, but at the moment there's still a strong willingness among consumers to tie up funds in products with fixed rate returns above on-call facilities."

The strong quarter for managed funds took the total net flow into KiwiSaver to $2.17 billion for the year ending September; net fund flows across all retail products totalled $1.2b, underlining the importance of KiwiSaver to the sector.

"KiwiSaver continues to be the major contributor of savings to the retail managed funds industry," said FundSource head of business Yvonne Davie.

"As a comparison, we saw a net outflow of $47 million from retail superannuation funds which, prior to the introduction of KiwiSaver, have traditionally been the voluntary retirement savings vehicle for many New Zealanders."

- © Fairfax NZ News