KiwiSaver funds have returned between 4-11% on average over 10 years. What investment opportunities are funds eyeing next, and should we expect fees to fall or rise as a result?
Total funds under management in KiwiSaver have surpassed $120 billion thanks to strong market investment returns recently, affording firms the ability to seek new investment opportunities.
“Over the last two years, two-thirds of the growth has simply been from markets going up, as opposed to contributions,” Morningstar data director Greg Bunkall told Markets with Madison.
About 62% of the total population, 3.3 million New Zealanders, were participating in the retirement savings scheme, according to the Financial Markets Authority’s 2024 annual report.
“Contributions will increase, but they’ll only increase probably with the rate of population growth and inflation.
“The growth won’t be as linear, it won’t be as predictable [from here],” Bunkall explained.
Morningstar data director Greg Bunkall says KiwiSaver was worth $121 billion at the end of 2024, with average 10-year investment returns between 4% and 11% depending on the type of fund.
That provided a sort of reality check for KiwiSaver firms that had enjoyed given growth since the introduction of the retirement savings scheme almost 18 years ago.
The focus would likely now turned to funds' performance, encouraging them to invest in higher growth assets such as stocks, infrastructure and private businesses, with some regulatory change required, Bunkall said.
Exposure to those types of assets, dubbed alternative, was about 2% of total KiwiSaver funds, he said, compared with double digits in Australia, where its superannuation scheme was worth A$4 trillion.
Morningstar’s research showed New Zealand’s retirement savings scheme hit $121b at the end of 2024, with average fees reducing about 30% since 2012.
“But they’ve kind of stayed around this level for a number of years now, probably two or three years,” Bunkall said.
He said fees would likely increase for higher-growth funds, including those eyeing alternative investments.
Watch Greg Bunkall discuss the state of KiwiSaver and what funds are eyeing next in today’s episode of Markets with Madison above.
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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.
Madison Malone (nee Reidy) is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.
