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KiwiSaver members paid $ 538.9 million to managers who managed their money for the year through March, but they lost a total of $ 820.9 million, and there is concern that some of them may have been caught up in those losses. .
The Financial Markets Authority has released its latest annual KiwiSaver report, which covers the period to the end of the first quarter of this year.
Equity markets tumbled during that time – the US market posted its fastest 30% drop on record.
KiwiSaver’s investment returns fell 122 percent over the 12 months, from $ 3.8 billion in the year to March 2019 to a combined loss of $ 820.9 million.
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Since then, markets have recovered extensively, but that is not reflected in this report.
Members paid nearly $ 540 million in fees in the year, 12.3 percent more than the previous year. The average fee per member was $ 150.
FMA regulatory director Liam Mason said the market decline could bring rates to “absolute relief” for some investors. It was the first year that many investors would see fees being charged for an investment loss, he said.
The report said that lower investment returns from most KiwiSaver providers meant that fees had a bigger impact on KiwiSaver balances this year.
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KiwiSaver members might be thinking about the value they get from managers after a year in which many lost money.
“It is the first time since the early days of KiwiSaver that we have seen [market] movement, ”Mason said.
It could prompt some KiwiSaver members to think more closely about the value they were getting, he said.
Most fees are charged as a percentage of the amount invested, so as balances increased during the year through member contributions and investment returns, so did the fees charged. The FMA report shows that the amount of money invested in KiwiSaver increased in the year to $ 62 billion.
Mason said the FMA hoped that as KiwiSaver’s scale increased, rates would drop. That hadn’t happened yet and it would keep the pressure going.
Mason said he was concerned about the level of change that had occurred during the year.
There were 256,393 fund changes during the year, an increase of 54 percent compared to the prior year.
Over the course of the year, $ 1.5 billion flowed from balanced and growth funds to conservative investments and cash.
Mason said that the past year had demonstrated the importance of thinking of KiwiSaver as a long-term investment.
People who switched to more conservative funds when markets fell in March would have lost money, he said.
Staying in a more conservative fund for the long term could reduce the return on your investments over their useful life. Higher risk funds tend to generate higher returns over the long term.
But even people who switched back blocked their losses because they would have bought the same assets at a higher price. The FMA was working harder to see how it could get the message across to investors that they should find the right investment for their risk profile and stick with it, she said.
KiwiSaver’s average balance in March was $ 20,474, 5.4 percent more than the previous year.
Total membership increased 3.15% to 3.1 million people. The number of people 65 and older in KiwiSaver increased by 12 percent. Mason said that could reflect the fact that people over 65 can now join the scheme and the low-interest-rate environment that leads people to seek alternatives to time deposits.
