KEY POINTS:
KiwiSaver has so far been a KiwiLoser, eroding more wealth than it is creating, figures from default provider ING show.
Just six months after the Government started the scheme, some of the funds are heading down instead of up, losing investors' money instead of making them richer.
The best-performing ING fund made only 2 per cent, well below bank interest rates.
The Government announced on Wednesday that 381,000 people had joined KiwiSaver, ahead of the 276,000 forecast to pour money in by July this year.
Although Finance Minister Michael Cullen claimed this month that the Labour-led Government's introduction of KiwiSaver had been a "huge success", the numbers tell the opposite story. International fund manager ING is losing money on 20 of the 24 KiwiSaver schemes it manages, after pouring people's savings into shares, cash, property and other schemes both in Australasia and around the world.
Superannuation funds are being affected by the sufferings of world equity markets, which in turn have been hit by the US sub-prime and credit market issues.
Cullen urged New Zealanders not to take a pessimistic view of KiwiSaver's performance in the first half-year.
"Let's not do the classic Kiwi media 'glass one-tenth empty' trick just when we're getting some traction on savings!" he warned the Herald.
"Obviously the market has seen something of a downturn in recent weeks. Markets do go up and down and people have to realise they are in a long-term savings vehicle. Any reasonable expectation over the long term is for a positive real rate of return."
But Gary Osborne, a former maths and economics teacher of Kelston Boys High School, found the statistics on ING's own website and said the bad performance showed that New Zealanders would be better to stay out of the state's financial dreams.
He analysed the 24 funds including National Bank, SIL and ANZ schemes and said he was appalled at the results.
"In all but five of the KiwiSaver funds, savers would be better off if they had slept with their funds under the mattress for the first six months of operation before allowing for the Government contribution," he said.
Data on KiwiSaver's performance was extremely hard to find because most providers were not posting results on their websites, he said. Yet a series of links on ING's website clearly showed the biggest loser was SIL KiwiSaver International Property which wiped 13c off its $1 units in just half a year.
The best performer was SIL KiwiSaver International Fixed Interest. But even that fund was up just 2c.
Fisher Funds' KiwiSaver scheme is also down from $1 to 97c and the value of one of Tower's KiwiSaver products dropped 3.5 per cent.
Philip Houghton-Brown, ING's chief investment officer, regretted that prices were down but urged people to stay in their schemes.
"It's unfortunate that the recent period of instability should occur so soon after many have just made the commitment to invest," he said.
"Over the lifetime of their investing, there will be such pockets of weakness and performance will not always be positive. [But] history has always shown that investment markets go up over an extended period."
Alasdair Thompson, chief executive of the Employers' and Manufacturers' Association, said KiwiSaver investors were probably unaware their investments were doing poorly initially because they might not realise the sharemarket had done badly.
The schemes could lose more money in the near-term, he said, but he also encouraged people to think long-term. "Investments will fall and rise in value but hopefully - as history tells us - they will rise more."
Cullen doubted this dip would have a lasting effect."It would take a crash much bigger than 1929 for the individual KiwiSaver to be a loser.
"The best time to invest of course for the long term is when the market is low."
