Inside Money

Business writer David Chaplin blogs on personal finance

Inside Money: KiwiSavers still flooding into bank schemes

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Statistics don't reflect any disillusionment with bank-run KiwiSaver schemes. Photo / NZH
Statistics don't reflect any disillusionment with bank-run KiwiSaver schemes. Photo / NZH

Contrary to the lovely correlations supplied by Claire Matthews and Callum Thomas from Massey University, KiwiSaver members are not abandoning the banks.

In their January 2012 study, based on an analysis of two and a bit years of KiwiSaver annual report data (2009/10, 2010/11 plus a slice of 2008/9), the authors conclude: "Contrary to expectation, the primary finding was for a significantly negative relation between bank ownership and member outflows."

Matthews told the Herald that while received wisdom suggested banks were the crowd favourites "[KiwiSaver member] actual behaviour is showing is they're going away from the banks".

This claim is actually easy to test and the results don't back up the bank-exodus hypothesis. If, in fact, KiwiSaver members were exiting the banks en-masse, this should be reflected in a declining market share of the financial institutions in question.

But according to research I have conducted over the previous five years, banks have gained market share year-on-year.

My data, which extends to March 2012, shows the three Australian-owned banks that dominate the KiwiSaver sector - ASB, Westpac and ANZ/National - have collectively tracked up membership share over the five periods on record, like so:

Period ending - % Bank market share by members

March 2008 49.5
March 2009 51.3
March 2010 52.3
March 2011 54.9
March 2012 56.2

And even if you exclude the bank-owned sub-brands (OnePath and SIL in the case of ANZ plus ASB's FirstChoice) from the calculations, the bank scheme membership market share data grows as follows over the same five-year period: 34.6 per cent; 38.7 per cent; 42 per cent; 45 per cent; 47.7 per cent.

The results don't reflect any disillusionment with bank KiwiSaver schemes. Furthermore, the above statistics don't include KiwiBank, SBS or the rapidly-growing BNZ KiwiSaver scheme (which launched past the research period).

Matthews cites the figure of 28,139 members as transferring out of the big five bank schemes in the year to March 2012, compared to 48,000 transferring in - indicating high bank turnover despite a net gain of 20,000 members overall. But, as Morningstar's Chris Douglas says in the Herald article, it's more than likely that members are switching to rival banks rather than leaving the institutional comfort zone.

According to my research, the major banks have always come out as net winners in the transfer market - which measures the difference between transfers of funds in from other providers and transfers out to rival schemes. In the 2011/12 year, for example, the top five institutions in terms of net dollar transfers (excluding Fisher Funds, which hit number one after absorbing $190 million or so from the Huljich scheme) were: Westpac; National Bank; ASB; ANZ, and; KiwiBank.

In their paper Matthews and Thomas use member numbers rather than dollars as the unit of transfer measurement but the two factors are highly correlated.

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