Almost 224,000 KiwiSaver members and just over $2.3 billion are on the move in December as the new default regime goes live.
The final figure, well below initial estimates, has seen the six incoming default providers onboard about 37,300 members and $390 million apiece, according to industry sources.
As reported in November, the ultimate default transition was set to fall under previous forecasts following a last-ditch push by incumbents to retain at-risk members. However, the five outgoing providers – AMP, ANZ, ASB, Fisher Funds and Mercer – were banned from marketing to default members after September 30.
At the start of the default reappointment process last year, the Ministry of Business, Innovation and Employment (MBIE) estimated about 300,000 members and $3.6 billion: by June this year, the Financial Markets Authority counted 263,000 potential default refugees.
Despite the lower-than-expected arrivals, the six newly approved default schemes – BNZ, Booster, Kiwi Wealth, Simplicity, Smartshares and Westpac – will receive a handy fund fillip over the next couple of months as assets transfer in a process scheduled to complete in February 2022.
The transfer comes amid rumours of potential sale action at parent companies of two default schemes.
Last week Australian research house, Morningstar, slammed the default appointment process for an overweight focus on fees.
While MBIE set a 60 per cent load on fees in appointing default providers in the 2021 round, in effect, the single factor accounted for almost all of the final decisions.
The study – authored by Morningstar director manager selection APAC, Tim Murphy – says long-term performance data shows a “far from a compelling case that fees should be the number-one criteria for selecting go-forward default KiwiSaver options”.
“It brings into question whether the focus on fees in this default provider review is really in the best interest of KiwiSaver members and whether it achieves the objective to ‘enhance the financial well-being of default members’,” Murphy says in the report.
“… We would encourage the government to consider a more balanced range of criteria in future default provider reviews, so that the best-performing funds are part of the default lineup in order to better empower the investment success of New Zealanders,” he says. “Alternatively, the government may consider creating and running one centralised default fund itself and allowing commercial providers to only operate as actively chosen KiwiSaver providers.”
As at the end of September, total KiwiSaver funds under management (FUM) stood at almost $89 billion, according to Australian research house, Plan for Life (PFL).
The PFL figures show ANZ tipped above $19 billion during the third quarter of 2021 with a steady – albeit it slightly below average – growth-rate of 2.6 per cent.
Milford reported the highest quarterly KiwiSaver growth of almost 13 per cent over the September quarter, pushing FUM up about $500 million to close at almost $4.4 billion.
Simplicity was the only other double-digit grower during the three-month period, up 11 per cent to $2.1 billion. AMP recorded the lowest KiwiSaver growth-rate of 0.6 per cent for the quarter, adding only about $40 million to increase total FUM to almost $6.7 billion as at September 30.