Merger helps level KiwiSaver field
Kiwisaver will be less of a lottery for new default fund members after the merger of two big schemes.
Fund manager AMP has ditched a policy of investing most of its KiwiSaver default members' money in cash after a strategic review brought on by its merger with AXA. That moves the pack of default funds closer together in their investment approaches.
But AMP's New Zealand boss Jack Regan says the fund manager still takes a different view of bonds from some competitors.
In February, the Sunday Star-Times highlighted differences between the six supposedly generic default funds, which had led to people being given greatly different asset weightings and returns depending which fund they were randomly put into by the Inland Revenue Department.
The funds are intended to be relatively vanilla holding pens for people who drift into the government-sponsored savings scheme when they start a job without picking a fund.
At the end of last year, AMP had 67 per cent of its default members' savings held in cash, when the average for other default funds was under 30 per cent. It also had the lowest returns of the default funds.
After AMP ended up with two default schemes through the merger, former AXA staff reviewed the asset allocations and AMP has now cut its cash holdings in favour of more bonds.
However, Regan said the proposed blended default scheme would hold less money in bonds than some other default funds, including the former AXA scheme.
"When we reviewed the AXA scheme, we increased their cash weighting away from bonds towards more cash.
"If you think about what's going on in investment markets, there is a view that bonds have had a very strong run and, as economic conditions start to improve around the world, the view is yields start to rise and . . . a strategic shift in terms of allocation to bonds seems to be the sensible approach."
If the Financial Markets Authority approves the transfer of former AXA members - planned for August 2 - AMP will own the third-biggest KiwiSaver fund, with more than a quarter of a million members and some $2.5 billion under management.
To meet the transfer requirements, AMP must show no-one will be worse off, essentially requiring it to offer savers the best of both schemes. Fees will be the same or lower for members of both, with substantial reductions for some.
Members moving from AXA (now called AMP Wealth) will pay 11 cents less in fixed monthly administration fees and, for members of the old AXA conservative fund, percentage-based fees drop from 1.03 to 0.87 per cent. Old AXA members have a month to comment on the proposed changes to the FMA.
- Sunday Star Times