ANZ warns of $14 billion Kiwisaver savings time bomb

The country’s largest Kiwisaver funds manger warns of a $14 billion retirement savings time bomb linked to default funds.

ANZ Wealth wants the government to change the rules around default scheme enrollment to stop investors from being short-changed.

Under current default settings, ANZ Wealth estimates about 191,000 Kiwisavers could potentially face a shortfall of $72,000 each in their final account balance when they turn 65.

That compares to the final balance they could arrive at in a more actively managed or "life stages" investment strategy, where Kiwisavers progress through various funds where risk is matched to their age.

About 30% of Kiwisaver memebers are predominantly invested in conservative Kiwisaver funds.

ANZ Wealth managing director John Body said investors were being short-changed and the shortfall was a “ticking time bomb” inside Kiwisaver.

“Over the medium to longer term – and this is what the vast majority of retirement savings plans are designed for – conservative funds can seriously disadvantage the saver.”

This problem with conservative funds was missed during recent debates around retirement savings, he said.

ANZ wants to see investment options for default Kiwisaver funds should be reset to better reflect the age and investment horizons of investors, so they progress from growth to more defensive funds.

Mr Body and ANZ Wealth's general manager investment management Simon Botherway will meet with the Minister of Finance and Minister of Revenue to present their research today.

It was hoped other default Kiwisaver scheme providers would support their call to extend the life changes strategy to all the default schemes.

“We’re calling for a simple adjustment to the government-prescribed default investment fund settings that are permitted under the contracts for the six government-appointed default providers," said Mr Body.

“If we do nothing, it will cost New Zealand billions of dollars and seriously compromise the standard of living for a generation of retirees.”

Conservative funds were more appropriate for short-term savers due to their lower risk profile.

“Our research demonstrates that over the long term, investors are likely to be significantly better off through the life stages approach than with the current default ‘conservative option,” said Mr Body.

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17 Comments & Questions

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Come on NBR, you need to proof read your articles.

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Me thinks the ANZ have found another way to make even more money.

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what does this say about the investor? The whole concept was about choice. If some idiot wants to leave money on term deposit for 30 years then that is a choice. A letter to the investor setting out options should be all that is needed. If one wants to dictate how the investment should be delivered then throw it all in the cullen fund and be done with it.

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We know that Onepath / ANZ don't really give a toss about investors, so reading between the lines I think this means that Onepath / ANZ charge higher fees on their higher risk funds, and therefore that it is better for Onepath / ANZ for these changes to occur.

New year, same old crap from these guys.

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Anonymous at 12:23 is missing the point. Sure there should be choice, but it should be an informed choice. Decisions about how you are going to finance your retirement shouldn't be based on ignorance and prejudice.

Anonymous at 1:31. Yes, fees would be higher, but so would the returns to the investor, over time, and it costs more ot manage equity investments than to manage cash investments.

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Thanks for clearing that up Mr Body. I know there is something in it for Onepath or they wouldn't be doing this. Don't try and bleat on about being altruistic as your 2011 behaviour (Argosy and Vital in particular) showed how Onepath really value its investors' interests. Laughable really - but yet people continue to fall for it

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Retirement funds guarantee nothing, other than fees for the managers. Ask the Aussies who have recently retireed, where their funds have lost on average a third of their value...

Best investments for the commercial naive is paying off your mortgage sooner.

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Always tempting to shoot the messenger but maybe they have a point here. Looks like a serious bit of research. If it's good for the saver/investor surely it's a good idea.

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Its not necessarily good for the investor. It is simply taking on more risk for the possibility (rather than the certainty) of more return. It is not a free lunch or a "ticking time bomb" as Mr Body so disingenuously puts it (to get media coverage).

One thing is for sure though - its a lot better for Onepath!

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Who do you trust in the end and yes its about choice
Governments will tinker with Kiwisaver forever and yes ANZ aint and wont do anything without making money They always win and we lose Fact of life Like the idea of paying off the mortgage though

Banks will always suck you dry although I have to say Kiwibank have been the best in my banking and finance payment career and yes My Kiwisaveris with Gareth Morgan who are now together !! Will National put Kiwibank on the block So many questions so few answers

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Surely an informed chioce in the current economic climate is prudent, in the last few years the 100% conservative option has out scored any other option, but sooner or later the speculative side of the economice bungy cord will overtake the others, so we can change our selected option at that time, I have a 50/50 option conservative/high growth with G/M, my wife has 100% conservative, we put in the same min requirement, and her returns to date have skittled mine, for a while there we were reasonably close, but her one has moved ahead quite a lot in the last 18mths.

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Too many default providers. They should set up an auction / tender for only one {cash deposit managing} default provider. Simple and cheap to run, and if punters wish to leave their 'nest-eggs' in it over the long term, free choice.

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Why do we need 6 default providers if they have to offer a conservative cash fund. Make it one default fund and give it to the NZ superfund to manage (or Kiwibank), this could even have a Govt guarantee.

If you dont want your money held with them, then you can move it, at which time, you would get a fund more suited to you.

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Harvey, really like this idea. Reducing the complexity and less fingers in the pie should reduce the fee environment. Wishful thinking?

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Giving the money to the NZ superfund to manage and asking for a Govt (Taxpayer) guarantee is a ticking time bomb if I ever heard of one!

Where would NZ Super have to invest the money to pay a conservative rate of return? If one of the International / Australian banks fail then effectively the Govt then has to bail out kiwisaver investors invested in this fund.

We have had enough "taxpayer guarantees" fall over thank you (SCF, the rest of the finance companies, AMI, EQC etc etc plus the ACC hole) so for once can we leave it up to individuals to choose their own investment strategy and not guarantee the return with taxpayer funds!

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The problem with ANZ is their past history with ING were they stalled, were exceedingly economic with the truth and played hardball with mislead investors. ANZ need to demonstrate they have learned the lesson that a good reputation is hard to get and easy to lose and takes a long time to be forgotten.

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I like gold investments.

Where's Kiwisaver at with precious metals?

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