David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: KiwiSaver growth spurt ends

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Photo / APN

The latest KiwiSaver data from investment research house, Morningstar, reveals the industry tracking pretty much as expected.

For the most part the big are getting bigger while the rest are fighting for the scraps.

"The industry remains highly concentrated: the eight largest KiwiSaver providers manage almost 95.0 per cent of the assets on the Morningstar database," the researcher's June 2012 report says.

Morningstar covers about half of the 40 or so KiwiSaver providers in its research but there's probably only two substantial players missing from its list: the KiwiBank-owned Gareth Morgan scheme and another patriotic provider, SuperLife.

As at March this year the two schemes collectively would've added almost $1 billion to the Morningstar database with SuperLife edging over $200 million and the Morgan product reporting more than $715 million under management.

In market share terms, if you add in another three months of flows, by June the Morgan scheme would've probably beat default provider, Mercer, into sixth place on the Morningstar list (and be hard on the heels of fifth-placed Tower, another default provider). SuperLife, meanwhile, could probably have claimed 10th place, pushing out fellow NZ-owned provider, Grosvenor, in the process.

Together, by my reckoning, of the larger providers the NZ team of Fidelity, Fisher Funds, Gareth Morgan, Grosvenor, Tower and SuperLife manage about $3 billion, or a quarter of all KiwiSaver money as at June the rest is managed by entities with Australian headquarters. That may not be an important distinction but you can argue that local owners at least retain control of all investment decisions while keeping profits in the country too.

However, Australian bank-owned KiwiSaver schemes continue to claw ahead in market share terms in fact, they are the only ones that appear to making headway on that measure (the exception, Fisher, has increased market share from 2.5 per cent in June 2008 to 4.9 per cent in the latest Morningstar figures after acquiring a couple of other schemes, principally Huljich).

The non-bank rivals, AMP, Axa, Mercer and Tower (all default providers) have seen their KiwiSaver market share slip since 2008 compared to the June 2012 statistics: AMP dropping from 13 per cent to 11.1 per cent; Axa (now owned by AMP) down from 8.1 per cent to 6.9 per cent; Mercer shrinking from 7.3 per cent to 6.2 per cent, and; Tower down from 7.8 per cent to 6.8 per cent.

Over the same period the Australian bank-owned schemes ANZ (which has four, ANZ, National Bank, OnePath and SIL), ASB and Westpac have increased their respective market shares from: 22.9 per cent to 24.8 per cent; 20.4 per cent to 21.2 per cent, and; 8.9 per cent to 11.9 per cent.

While most KiwiSaver providers would have increased funds under management and members in absolute terms, it's clear that after five years in business (although as Morningstar points out the real anniversary, from a provider perspective, is not held in July but October, the month in 2007 when KiwiSaver money first appeared in their accounts) the days of easy growth for all are over.

As total KiwiSaver membership approaches 2 million, and the government putting an auto-enrolment drive on hold, the battle between providers for existing members will only intensify.

Even the high-flying Gareth Morgan KiwiSaver (GMK) scheme is not immune from attack. According to the GMK annual report for the 12 months to March 31 this year, for the first time the scheme suffered a net loss of funds in transfers between providers.

While the actual number of members transferring to and from GMK was about even (1580 in, 1518 out), it looks like those with higher balances were moving out with transfers out of about $17 million versus transfers in just over $11 million.

Despite that GMK still grew its total funds under management over the year by almost $190 million while adding a net 3429 members, which should keep new owner KiwiBank happy.

David Chaplin

A personal finance columnist for the NZ Herald

David is a freelance journalist who has covered the financial services business on both sides of the Tasman for over 15 years. David has edited magazines and websites for the financial advice, investment and superannuation industries. Today, he contributes to various publications in Australia as well as his bi-weekly blog for the NZ Herald under the 'Inside Money' banner.

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