Westpac has hinted at underlying investment changes ahead as the bank moves to slash fees on its almost $9 billion KiwiSaver scheme later this year.
According to a Westpac spokesperson, the institution had “no [KiwiSaver investment] changes to announce at the moment, but will update the market as we prepare to implement the fee reductions for our customers and continue to implement our responsible investment strategy”.
“We regularly review our choice of investment strategies and selection of managers across our funds,” the spokesperson said.
Last week Westpac announced price-cuts on its KiwiSaver scheme (due to take effect at the end of September) ranging from .04 per cent for the cash fund to 0.25 per cent for the growth option. At the same time, Westpac will drop the $12 annual administration fee across all its KiwiSaver funds.
Following the fee reductions, all Westpac KiwiSaver funds will cost 0.4 per cent bar cash (0.25 per cent), balanced (0.5 per cent) and the growth (0.55 per cent).
The cost-cutting will take Westpac KiwiSaver fees below all Australian bank-owned rivals with the benchmark currently set by BNZ, which prices funds between 0.3 per cent (cash) and 0.58 per cent (all others except the first home-buyers portfolio). BNZ also ditched the fixed dollar annual member fee in 2019.
ASB KiwiSaver fund fees range across 0.35 per cent to 1 per cent plus an annual member charge of $30. By contrast, the main ANZ scheme charges members between 0.27 per cent for cash to 1.09 per cent for the growth fund with an $18 annual member fee on top.
Historically, bank-owned KiwiSaver schemes have matched fee reductions with increasing exposure to passive investment strategies. Both BNZ and ASB are largely index-based while ANZ and Westpac lean to active management – although the latter pair have some underlying passive strategies, especially for their respective default funds.
Earlier this year ANZ moved about $5 billion of global equities and fixed income mandates previously run index-style by Vanguard to a factor-based approach managed by Northern Trust.
Westpac also appointed Northern Trust late in 2020 to manage some of its global equities portfolio (across KiwiSaver and other funds). In total, Westpac uses 13 external managers across various asset classes while keeping cash and local fixed income management in-house.
The most recent Westpac KiwiSaver statement of investment policies and objectives (SIPO) says the bank-owned manager “believe[s] markets are somewhat inefficient and portfolios can be positioned in a manner to take advantage of opportunities that occur, which is why our philosophy is generally to apply an active approach to asset allocation and investment selection.
“We also believe in a multi-manager approach as a means of generating more consistent performance.”
BNZ and Westpac both survived the default KiwiSaver cull revealed this May that will see ASB and ANZ shed an as-yet unknown number of members and assets during the regime change later this year.
Earlier in July AMP, which was also sacked as a default provider, unveiled a new fee schedule for its now passive BlackRock-managed diversified KiwiSaver funds that price most options at almost 0.8 per cent – down from the previous actively managed costs of between 1-1.3 per cent – plus an annual member charge of $23.40.
Simon Power, Westpac NZ acting chief, said in a release: “We last cut our Westpac KiwiSaver Scheme fees in December 2019 and we’re pleased to follow this up with another significant reduction for members.
“Removing the annual administration fee will have a particularly positive effect on members with low balances.”
Westpac Australia recently confirmed it would retain its NZ operations after embarking on a review earlier this year putting a possible trade sale or NZX float on the table. This month the NZ bank also offloaded its life insurance business to Fidelity Life, majority owned by the NZ Superannuation fund and Ngāi Tahu Holding, for $400 million.