Home ownership withdrawals have also almost hit $1m
The Financial Services Council (FSC) celebrated the end of a successful year this week, with Wellington attendees hearing from MBIE’s Sharon Corbett the the FMA’s director of regulation Liam Mason on some of the biggest challenges facing 2020.
Mason took a deep dive into the performance of KiwiSaver over the past year, noting that although statistics around membership, the total asset pool and payments looked very promising, there was still some work to be done around fees and encouraging active participation in the scheme.
“KiwiSaver is a big part of what we do and a big part of the success of the New Zealand financial markets, and it’s becoming more important every year,” Mason said.
He noted that KiwiSaver now has an approximately $57 billion total asset pool, a figure up by 17% on the previous year. It also has 2.9 million members, and recently hit the $1 billion mark in total amount paid to over 65s.
“That is KiwiSaver doing its very job,” he stated
“We’re also getting pretty close to that in the home loan withdrawals, over $900 million withdrawn, and that’s another important part of KiwiSaver - helping people find their way into home ownership, and get that asset growing for them. And so 12 years in, KiwiSaver looks like it’s starting to make a really significant contribution to the objectives that were set up for it in the first place.”
“However, a little more concerningly, there now 1.2 million KiwiSavers who are not contributing,” he added.
“That tells us that at least for some people, KiwiSaver might not be affordable, or it might not be sufficient in and of itself to build the habit of saving.”
Mason says ensuring that KiwiSaver is being the best it can be in terms of actually building savings - not merely gaining membership - is going to be an ongoing challenge. However, the amount of savers switching out of default funds this year has grown significantly - a promising sign that KiwiSavers are making more active decisions.
“We’ve been putting pressure on default providers to do more to get their members to make active choices, and that’s increased from 28,000 last year to 52,000,” Mason said.
In terms of fees, Mason says they still aren’t falling as fast as the FMA would like. Nobody raised their fees in the year examined by the report, but research also found that KiwiSaver is still more expensive that many international superannuation schemes.
“This will warrant further work,” Mason said.
“We’re also seeing some gains by new entrants who have come into the market with some challenging lower-cost fee models, and that’s great to see. We want competition to do as much of the work as possible, rather than the regulators having to try to influence that.”
