Crowded KiwiSaver market sparks concern

The number of KiwiSaver providers in the New Zealand market may be unsustainable, the head of one of them says.

Tuesday, March 17th 2015, 6:00AM

by Susan Edmunds

Mercer NZ managing director Martin Lewington said he could imagine a future where KiwiSaver was offered by a few big providers with multi-sector portfolios.

A few boutique businesses would then operate alongside, differentiating themselves with very specialised offers, such as real assets or investments in New Zealand small-cap companies.

“That could be quite a good business model,” he said.

There are 28 KiwiSaver providers in the New Zealand market. The big banks have the lion’s share of the business – almost 60%, excluding the financial adviser-distributed ANZ OneAnswer scheme.

Lewington said it was likely there were too many providers to be sustained over the long-term.

“When there’s too much choice people get confused and don’t make any decision. But I believe in the market and ultimately the market will decide if it’s too many. My personal view is that’s quite a lot of choice.”

He said there was a lot of talk about potential consolidation activity but were no real signs of it happening yet. “But you would expect it.”

Mercer is doing some consolidation of its own, however.

It has added three portfolios to its main KiwiSaver scheme – moderate, growth and shares, aligning it with its employer-based offering, Super Trust KiwiSaver.

The employer-based scheme is now closed to new members and will be combined with the main scheme.

Lewington said the two schemes had been set up to offer the same product, one as a default operation and one for people who signed up via their employer.

But he said legislative changes meant they no longer needed to be kept separate. The moves were just an in-house tidy up, he said. “The end game is that members benefit from reduced costs and reduced complexity. There were eight single-sector type KiwiSaver offerings and the market wasn’t there so we are consolidating.”

In February, the employer scheme cut its 14 portfolios down to seven.

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