Gareth Morgan funds tipped to grow today with KiwiSaver merger

Gareth Morgan. Photo / The Listener

The long-anticipated consolidation of the KiwiSaver market has begun.

The Council of Trade Unions is expected to announce today that its scheme will be wound up, with members advised to transfer to Gareth Morgan KiwiSaver.

The CTU runs two superannuation schemes worth around $26 million under the Industry Retirement and Insurance Services (IRIS) brand name but only one will be shut down.

The IRIS Super scheme, which was established in 1990, will continue to be available to union members.

It is backed by the National Distribution Union, Engineering, Printing and Manufacturing Union, Nurses Organisation and Services and Food Workers' Union.

But its IRIS KiwiSaver scheme, which has just 1000 members, will be closed to new people and eventually shut down.

Investors' money will be transferred to a new scheme and is not at risk of being lost.

The Business Herald understands the union has recommended members switch to Gareth Morgan's KiwiSaver business, which already has 35,000 members and is the eighth largest provider with $142.2 million under management. It is not known if Gareth Morgan has paid to take on the additional members. Industry commentators have said since the launch of KiwiSaver there would be consolidation of the industry.

There are 54 schemes on offer and 31 providers, but 75 per cent of the $2.725 billion is invested with just six providers.

The IRIS KiwiSaver scheme is currently administered by Aon New Zealand, a company wholly owned by US insurance giant Aon Corp. The money itself is also outsourced to a number of providers to manage. IRIS lists Tower as its investment manager.

Aon Consulting general manager David Wood said the closure of the scheme would mean it earned less in administration fees as the KiwiSaver accounts were transferred.

Tower chief executive Sam Stubbs said it was just one of the investment managers looking after the money and he was not sure how the company would be affected by the change.

"We just don't know. We manage a portion of the money, it is their choice who their underlying fund manager will be."

Stubbs said Tower was in discussions with IRIS about what its future involvement would be but it was possible that it could continue to manage a portion of the money under Gareth Morgan as well.