KiwiSaver remains a statistically robust competitive market place despite a significant increase in ownership concentration in the most recent financial year, according to a new Melville Jessup Weaver (MJW) study.
The second annual MJW KiwiSaver data dive found competitiveness in the sector had reduced year-on-year per a formal measure – the Herfindahl-Hirschman Index (HHI) – of ownership control.
Based on overall scheme ownership, “all HHI measures are higher, although still below the critical 1,500 level (except for briefly around 2015) where the descriptor “moderately concentrated” might be applied”, the report says.
“The downward trend which started in 2015 was bucked this year as concentration rose over all three measures. The acquisition of Kiwi Wealth by Fisher Funds is a large driver here.”
As the 2023 Investment News NZ (INNZ) KiwiSaver report shows, Fisher now owns about 15.4 per cent of the market post the Kiwi Wealth acquisition, putting it on par with ASB as the second-largest provider. Fisher has roughly doubled KiwiSaver market share since acquiring the Aon and Kiwi Wealth schemes in 2021 and 2022, respectively.
The MJW study, which taps into data supplied by INNZ, also highlights the impact of the default disruption following the mandatory government review in 2021 that saw five large incumbents sacked and two new appointees (SuperLife and Simplicity).
Following the first seven-year review in 2014, the number of default providers rose from five to nine with the group collectively managing about 65 per cent of total KiwiSaver assets. The government reduced the default pack to just six in 2021, removing the two largest providers – ASB and ANZ – as well as AMP, Fisher and Mercer.
“… after a period of market dominance, the default providers now account for less than half of the KiwiSaver market by all three measures – a change driven by the reallocation following the 2021 review,” the MJW study says.
As well as exploring the competitiveness quotient, the analysis also adds actuarial consultancy heft to other factors covered in the INNZ report including assets under management, member trends, performance and fees.
Ben Trollip, MJW principal, says in the report that the “annual asset growth rate (+4%) was the lowest since KiwiSaver’s inception” as poor investment markets dragged.
“However, over the five year period assets have almost doubled from $48.6 billion to $93.6 billion. Membership has reached 3.25 million, up about 417,000 over the same period,” he says. “While fees and expenses have also increased over the last five years, they have fallen over the year to March 2023 – likely reflecting continued competitive forces and a lower level of performance based fees earned.”
The MJW measure shows the average cost of KiwiSaver dropped to 0.72 per cent for the 12 months to March 31 this year compared to 1.56 per cent in the 2009 year.
“Default providers are even lower on average – just 0.43% in 2023,” the report says.
On a per-member basis, MJW puts the average annual dollar-cost of KiwiSaver at $200: for default schemes only the figure drops below $150 while the non-default member pays on average $250 per year.
The KiwiSaver cost analysis excludes brokerage, which is not uniformly disclosed, and MJW also warns that “fees disclosed in the financial statements may not tell the full story”.
“For example, there may be fees implicit within the investment products in use. There may also be commission or fee-rebating arrangements,” the report says.