KEY POINTS:
Four out of five KiwiSaver providers will not exist within five to 10 years, an industry leader says.
Michael Chamberlain, an actuary and principal of KiwiSaver provider Aventine, told yesterday's first Retirement Symposium there were too many providers chasing the public's money and consolidation of the industry would
be inevitable.
"There are currently around 51 providers listed on the Government actuary's website. Of those 43 are targeting the public - 43 chasing the public's money - that's at least 33 too many."
Chamberlain said some would amalgamate, others would be taken over and some would disappear completely.
"More than four out of five providers will not be here in five to 10 years' time. Rationalisation will happen."
For those who join KiwiSaver, savings will not be at risk - it is likely to mean little more than a paperwork change and a new name on the letterhead.
But Chamberlain said that for providers the next few years would be about defining themselves through their presence, quality of service and quality of product.
"We have to ask who will win. To do that we need to take a blind taste test and look at fees, flexibility, convenience, meeting a particular need and service through distribution." He said those organisations with strong distribution channels, such as banks, would be the likely winners.
This is a trend which has already begun to show.
Estimates by Wellington actuary firm Melville Jessup Weaver, which is the adviser to the Retirement Commission, announced last week that 85 per cent of all savers were with seven providers - six of which are the Government's default scheme providers.
Of those the biggest winner has been ING with about 20 per cent of the market share - a company which provides KiwiSaver products for both ANZ and National Banks.
The top seven also include banking groups ASB and Kiwibank through its joint product with Mercer and Westpac, whose investment management is run by BT Funds Management. Axa also undertakes investment on behalf of the BNZ.
But Chamberlain also said the distribution factor did not guarantee the banks a future as KiwiSaver providers, as history showed that big names could also fall out of the industry.
He cited the exit of British bank Barclays and other well-known names such as Royal and Sun Alliance and Norwich Union over the past 15 years.
"While the banks and specialists should dominate, there will come a day where one of those with good distribution will get into difficulty and will disappoint."
Chamberlain said that would leave room for speciality players and those with more cost-effective models.
While no one has defined the cost to the industry, there is consensus among the big players that it will be at least five years before they recoup their investment.
Tower Investment chief executive Sam Stubbs said his company had already been approached by several providers looking to pass their KiwiSaver clients on.