KiwiSaver remains a bank-dominated universe but competition in the market warmed up again over the last financial year, the latest Melville Jessup Weaver (MJW) annual review of the sector has found.
According to the MJW study, KiwiSaver choice levels continued to climb during the 12 months to March 31 this year as per the Herfindahl-Hirschman Index (HHI) statistical measure of competitiveness.
Any industry below 1,000 on the HHI scale rates as ‘unconcentrated’ with the KiwiSaver market falling into that range across assets, members and fees based on an all-scheme analysis.
But as measured by scheme ownership the KiwiSaver HHI score tips up into the ‘moderately concentrated’ zone, accounting for multi-scheme providers ANZ and Fisher Funds.
“However, the trend downwards is also evident here. All three measures are closing in on the 1,000 level,” the MJW report says. “Additionally, in the last year the membership HHI has fallen significantly – partially driven by the reallocation of default members.”
The period covered by the MJW study, which sources much of the data from the Investment News NZ annual KiwiSaver market report, includes the Fisher purchase of the Aon and the launch of the Aurora scheme.
Post balance date, Fisher also bought the $6.6 billion Kiwi Wealth scheme in a deal that might skew the KiwiSaver HHI figure higher in the next MJW report.
Nonetheless, Ben Trollip, MJW principal, said the data suggests healthy competition in the KiwiSaver market with challenger schemes able to grab a foothold.
For example, Trollip said Aurora was the fastest-growing scheme from scratch a first year of operation (barring the initial launch year of KiwiSaver), putting on almost $50 million from going live in August last year to the March 31 reporting date.
Aurora, now up above $100 million, surpassed the Pie Funds-owned Juno scheme, which grew to $34 million in its inaugural year.
“It’s a good comparison, too, because both Juno and Aurora started taking on members in August,” he said.
Trollip said the analysis also reveals the significant impact of the default provider transition on the KiwiSaver market during the year as about 240,000 members and $2.4 billion moved home.
Clearly, the transition distorted the year-on-year statistics for the five sacked providers – AMP, ANZ, ASB, Fisher and Mercer – and six newly confirmed default schemes (BNZ, Booster, Kiwi Wealth, Simplicity, Super Life and Westpac).
And the period also saw overall default membership fall “from 356,000 to 298,000 over the year, the biggest reduction on record”.
“This may reflect campaigns by the outgoing default providers to contact and convert their default members to active members,” the MJW study says. “As at 31 March 2022, less than 10% of members were classified as default. This is down from almost one in four in 2011.”
Default status, though, is a double-edged sword, as the Investment News (IN NZ) 2022 KiwiSaver report (titled ‘Real tricky times’) revealed in September.
“Often painted as a ‘lucrative’ gig, default status comes with even more obligations on providers this time around (including quasi-advice requirements) to serve a low-value, disengaged client base,” the IN NZ report notes.
“… the default member exchange has simultaneously lowered the quality of incoming provider books and increased it for the departees as measured by two key statistics: average member balance; and, the percentage of non-contributing members.”
The MJW 2022 KiwiSaver report includes a breakdown across assets, members, fees and expenses, investment returns and competitiveness, weaving in the IN NZ data with its own performance data and sprinkled with statistical prowess.