David Chaplin 's Opinion

A personal finance columnist for the NZ Herald

Inside Money: Super tradition lives on in shadow of KiwiSaver

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Despite the popularity of KiwiSaver, there is still more money held in 'old-school' super funds.
Despite the popularity of KiwiSaver, there is still more money held in 'old-school' super funds.

With upwards of $17 billion under management as at September this year and government-mandated growth, KiwiSaver is undoubtedly the savings vehicle of the moment, and the future - but it hasn't quite yet obliterated the past.

In fact, traditional superannuation schemes - which include employer-sponsored, retail and some government-offered options - still hold more money than the current KiwiSaver total.

According to the Financial Markets Authority (FMA) 2013 "Superannuation Schemes Report", employer-sponsored schemes manage $14.38 billion and with retail super products looking after an additional $4.79 billion.

And if you throw in the $3 billion or so managed by the Government Superannuation Fund (closed to new members in 1992), that equates to just over $22 billion of individual retirement savings held outside of KiwiSaver.

It's possible KiwiSaver funds under management might surpass $22 billion in the current period. As the latest IRD annual statistics show, various KiwiSaver contributions in the 12 months to June 2013 totalled about $3 billion. Assuming contribution levels rise in line with past trends, and investment markets are kind once more, $22 billion in KiwiSaver by June 2014 isn't out of the question.

Either way the new regime is set to steamroll these 'old-fashioned' super schemes (many of which, especially employer-sponsored schemes, offered more generous and flexible terms than KiwiSaver) within the next couple of years.

As the FMA report illustrates, the traditional superannuation sector, in a holding pattern for many years, has seen "scheme membership and total net assets... significantly reduced" since the introduction of KiwiSaver.

According the FMA report, in the six years from December 2006 to December 2012, traditional retail super schemes (open to anyone) saw membership, annual contributions and net assets drop by 45 per cent, 55 per cent and 35 per cent respectively.

Over the same six-year period, the absolute number of employer-sponsored schemes (offered by specific companies only to their employees) fell by 45 per cent and membership declined 21 per cent.

But despite this massive decline in the sector, the roughly 227,000 remaining members of employer-sponsored schemes are clearly making the most of a good thing, with annual contributions and net assets up by 8 per cent in December 2012 compared to six years earlier.

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.

Read more by David Chaplin

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