New Inland Revenue Department (IRD) data has confirmed a sharp slowdown in the KiwiSaver market with net membership growth down over 20 per cent year-on-year.
According to a just-released IRD report, the total KiwiSaver universe saw a net increase of about 70,000 members during the 12 months to June 30 compared to 88,660 in the previous annual period.
Average monthly net membership growth slumped to 5,849 over the latest 12-month period, slumping from 7,388 for the 2020 reporting year.
(According to Investment News NZ 2021 KiwiSaver report released this September, net membership was up only 62,000 or so for the 12 months to the end of March versus about 93,000 for the previous annual period.)
In spite of the recent significant decline in member growth-rate, the IRD forecasts KiwiSaver net membership to increase by about 120,000 in the current reporting year (ending June 30, 2022) before sliding back to about 70,000 over each of the subsequent two years.
The IRD estimates KiwiSaver will host about 3.37 million members by the end of June 2024 against 3.12 million at the same date this year.
“Since 2010, total member numbers have increased by 114%,” the report says.
The tax department analysis also reveals a slight uptick in income across the board with proportion of KiwiSaver members earning an annual $50,000 or less falling from 67.3 per cent last year to 63.5 per cent in the period under review.
While the overall income increase flowed over mostly to the middle market ($50,000 to $100,000), the IRD data shows the percentage of KiwiSaver members earning $100,000 or more jumped from 7.2 per cent last year to 8.3 per cent in the 12 months to June 30, 2021.
The income boost likely took thousands of employees from the 17.5 per cent tax bracket to the 30 per cent marginal rate that kicks in at $48,000: such a move would also eventually require members to adjust their KiwiSaver prescribed investor rate (PIR) to the top 28 per cent level.
Following an IRD system upgrade in 2019 the tax department found almost 1 million KiwiSaver members had supplied wrong PIRs, including about 450,000 on the low-side. In the wake of the data-sweep, many KiwiSaver members were hit with catch-up tax bills (though no refunds were provided).
The IRD now automatically matches PIRs (covering KiwiSaver and all portfolio investment entity – or PIE – funds) against total taxpayer income. A new law also empowers the IRD to refund any overpaid PIE tax.
Aside from the membership growth trends, the IRD report shows a slight increase in opt-outs from the KiwiSaver auto-enrolment process (6.1 per cent against 5.4 per cent last year), a decrease in the proportion on contribution holidays (3.7 per cent compared to 4.5 per cent in the 2020 period) and a big jump in scheme transfer numbers during the first half of this year.
The analysis also highlights the growth in KiwiSaver scheme numbers over the 12 months to June 30 with the IRD counting 36 schemes and 31 providers at the end of the period.
Currently, the Disclose website list 37 registered KiwiSaver schemes, including four new offers launched during the last 12 months or so, including: InvestNow; KiwiWRAP (Consilium); Select; and Aurora.
But the market is set to shrink with Fisher Funds due to take possession of the Aon scheme at the end of this month. Furthermore, ANZ has closed its stand-alone default scheme after missing out on reappointment for the new regime due to kick-off on December 1.
Under the default transition plan, five incumbent default providers – AMP, ANZ, ASB, Fisher and Mercer – will hand over an estimated $3.6 billion and 300,000 members between them to the six successful candidates.
The IRD is responsible for ensuring a smooth transfer of member data during the default do-over. Meanwhile, the relevant KiwiSaver providers have been charged with managing an equitable asset transition – overseen by government and regulators – in a process expected to take about 75 days from the beginning of December.