Amanda Morrall talks to ANZ's Wealth John Body about KiwiSaver five years on and how the savings profile has changed in that time.
By Amanda Morrall
Five years ago, the typical retail saver was male, middle aged and middle to high income.
Today you'll find a much different picture, at least when you look at the demographic that makes up KiwiSaver, which represents 41% of retail funds under management now.
Among the membership of the country's largest provider, ANZ Wealth (which includes OnePath), women outnumber the men (52% versus 48%) and the average investor is 34 years old.
John Body, managing director of ANZ Wealth credits the national saving scheme with transforming the saving landscape.
He attributes the boost in female savers, and the increase in younger savers, to the accessibility of the scheme and also its ubiquity in the workplace.
Whereas in the past savers in the retail sector presented to a financial advisor or a funds management outfit with a lump sum amount to invest, KiwiSaver has opened managed funds to a whole new type of investor, the first time investor.
With the NZ$1,000 kick-start from Government, and the automatic enrolment process through the workplace, the usual financial hurdles and subscription process has been removed.
"You can start with zero and slowly build up the investment, so it means anyone can save, there's no barrier to entry,'' said Body.
Based on ANZ Wealth's profiling of its KiwiSaver members, someone who invested in the scheme from inception earning about NZ$40,000 a year, now has more than NZ$13,000 in savings.
Body said KiwiSaver balances have reached a stage where members are starting to pay closer attention.
"We noticed in the last couple of weeks when we sent out the annual statements, we got a lot more phone calls than we've had historically. People are asking about their balance, their investments, their performance. When you open up your statement and see NZ$13,000, you start to take an interest.''
While interest among members is gaining, Body admits there is still room for improvement.
He said the chief task for New Zealanders was to figure out how much they need in retirement and work backwards from there to determine how much in monthly savings they need to set aside to achieve the income they need to last in old age.
Calculating the long-term difference between being in a conservative fund as opposed to a growth fund (with a greater exposure to equities), was another challenge for average investors, he said. (For more on fund types read this).
Find your Fund here and look up asset allocation, performance and fees.
'Young should be more aggressive'
With 1/2 million KiwiSavers still in default funds, many providers, including ANZ Wealth, argue that younger members with a long time frame to invest will be shortchanging themselves by not being in a more aggressive fund, earning higher returns.
According to ANZ calculations, a young person starting out their working life and earning an average age, could be NZ$72,000 worse off when it comes to retirement by staying in conservative fund. (For more on ANZ's savings timebomb hypothesis click here).
Despite the on-going uncertainty of the markets, and also how well default funds have performed since inception, Body upholds the long-term benefit of funds with a greater allocation of equities or other growth assets. He points to the relative performance of funds since inception during what is arguably one of the worst economic periods in decades.
Growth funds run by ANZ Wealth have earned only NZ$60 less than a conservative fund through the global financial crisis, the sovereign debt crisis, a domestic recession and major natural disaster.
While the difference today may seem slight, during improved market conditions, the spread will widen considerably, said Body.
"If you are in a lifestages fund and have 40 years to go, you could take some confidence in the last five years you've done okay and markets in my watch have never performed badly for more than five years so we still think it's the right strategy and our modelling supports that.''
With more than 75,000 of ANZ Wealth's KiwiSavers having made lump sum contributions over and above regular monthly savings, Body said he was confident that the New Zealanders were starting to take a more active part and interest in managing their money for future years.
With the first batch of KiwiSaver retirees becoming eligible to withdraw their funds next month, Body encouraged members to be thoughtful and have a long-term view about the money.
"Think about what you need for the next 10 years to live on. And don't necessarily make a fast decision about KiwiSaver. It can stay there. It will continue to be managed by your provider, you'll still get good returns and don't hesitate to look at a standard withdrawal.''
ANZ Wealth allows its members 65 and older to keep their funds invested contingent on a minimum withdrawal on a fortnightly basis.