If there was going to be a celebration for the KiwiSaver’s 10th birthday, it would be the banks who would party hardest.
According to research house Morningstar, just six providers (mostly banks), have around 85 per cent of the KiwiSaver market that is on the Morningstar database. That should be worth a pallet load of champagne on the top floor of bank buildings in Sydney and Melbourne.
The rest of us can also enjoy a quiet tipple. There are many of us who now have some savings and those savings are growing well – courtesy of Government and employer subsidies, good returns, and of course, our own contributions.
People are starting to sit up and take notice of their KiwiSaver accounts. The average amount in a KiwiSaver account may be just $14,000, but many KiwiSavers are children and others who just signed up for the $1,000 kick start. There are a lot of people with more than $14,000 in KiwiSaver.
As balances grow, so too does the amount of involvement and concern. At seminars and talks I have done around the country, I have noticed many people are more interested in their KiwiSaver accounts – and they are starting to switch providers. With a higher balance, it becomes worthwhile to take some time to have look around: to consider options and, maybe, to switch providers.
However, in the first decade, banks have grabbed the bulk of the market share: it is easy to sign up with your bank, and banks have been selling their own KiwiSavers as hard as they can. Moreover, KiwiSaver is quite “sticky” meaning that there is inertia – people tend to stay with their bank even though they may have reservations about it
Banks have done well from KiwiSaver, regardless of whether their funds are good, bad or indifferent.
One important thing to keep in mind is that KiwiSaver has not yet been tested by a major market fall. No-one knows what people will do when they see their KiwiSaver balances sharply reduced by a market crash. Will they panic and stop contributing? I hope not, but we cannot be sure.
KiwiSaver started at the perfect time, just before a major market crash. Balances were very low when markets fell, so no-one much cared. Since the GFC ended, markets have recovered strongly and there have been good returns ever since.
One day of course, this investment summer will end. You need to make sure you are positioned correctly and your provider is not taking too much risk with your money. Investors always need to keep one eye on risk.
At this 10th birthday, it is time to pay attention to what you have and ask if your KiwiSaver is positioned well for whatever the markets throw at you, both the good and the bad.
KiwiSaver is real money and it is your money. A significant birthday should be time to have a good look at what your money is doing.
Martin Hawes is the Chair of the Summer KiwiSaver Investment Committee. He is an Authorised Financial Adviser and a disclosure statement is available on request and free of charge, or can be found at www.martinhawes.com.