Investors becoming more comfortable with the long-term nature of KiwiSaver, Financial Markets Authority says

KiwiSaver members withdrew $5 billion from KiwiSaver during the March 2024 financial year, an 18.8% rise from a year earlier, according to the Financial Market Authority’s annual KiwiSaver report.

While people over the age of 65 accounted for the majority of that $5 billion withdrawal figure, taking out $3 billion, first home withdrawals totaled $1.2 billion in the year.

The FMA says almost 35,700 people withdrew that $1.2 billion and first home withdrawals were up 34% compared to a year earlier. However, that's still 14% lower compared to the peak in 2022.

The average withdrawal amount has also risen in the last three years, with the average first home withdrawal rising from $29,212 in 2021 to $34,718 by March 2024.

According to the 2024 KiwiSaver report, the voluntary retirement savings scheme closed its financial year with $111.8 billion in funds under management (FUM), a 19.3% increase from last year’s $93.6 billion.

The FMA says this is the strongest growth in total funds since 2021, with total KiwiSaver funds having almost doubled since March 2019.

Total KiwiSaver contributions which includes employee, employer and government contributions came to $11.2 billion, up 6.5%.

Breaking that $11.2 billion figure down, individual KiwiSaver contributions – through salaries and wages – were up to an “all-time peak” of $5.9 billion in the March 2024 year.

Another $3.3 billion net of tax came from employers in 2024, while $990 million came from the Crown.

Lump sum contributions were up “slightly” to $839.1 million in the 2024 financial period, but have plummeted 60% compared to two years ago when $2.2 billion was contributed just from lump sums, according to the FMA.

KiwiSaver made $13.1 billion in net investment returns, a big turnaround from the net investment loss of $1.9 billion the FMA reported last year. 

The FMA’s Chief Economist Stuart Johnson says it was a welcome change from the prior year that KiwiSaver net investment returns in 2024 were greater than the total contributions of $11.2 billion. 

“We are taught to remember that investments can go down as well as up, but let’s be honest, it’s always nicer to see them go up,” he says. 

“Overall, 2024 shows that KiwiSaver investments are working well for New Zealanders.”

There are now 3,334,654 individual members in KiwiSaver, which the FMA says is up around 2% year on year. 

The number of non-contributing KiwiSaver members rose 3.4% or 42,000, to 1,298,270 non-contributing members over the past 12 months.

The FMA’s report found the average balance per member was up 16.5% to $33,514. This is 16% higher than the average balance of $28,778 in the 2023 financial year.

Since 2020, net total membership has grown over 10%, which is an increase of more than 300,000 members over that time.

Spiked

The number of significant hardship withdrawals soared 60%, or an extra 11,000 people, compared to a year earlier to 29,242 people.

The FMA’s report says the total amount withdrawn from KiwiSaver for financial hardship reasons was $264.3 million, working out to be an average amount of approximately $9,000 per withdrawal. 

“While this is a significant increase, the number of people making hardship withdrawal this year still represents less than 1% of the 3.3 million KiwiSaver members,” the FMA says.

The number of permanent emigration withdrawals also “spiked” and were 37% higher from 1,882 to 2,586 in 2024. 

“This number is back up after a decline from the previous peak of 2,357 permanent emigration withdrawals in 2020. The dollar numbers have also increased substantially, up 62% to $70 million year-on-year,” the FMA says.

Annual KiwiSaver fees rose 18.9%, or $125.5 million, to $789.6 million. Johnson says this increase in fees is “in line” with increases in total FUM and suggests fees haven’t increased per dollar invested – but haven’t decreased either.

“While we have seen a gradual decrease in fees as a percentage of funds under management over the last 10 years, this wasn’t continued in the 2024 data. I encourage KiwiSavers, when looking at their annual statements, to focus on total returns, or returns minus fees,” he says.

John Horner, the FMA director of markets, investing and reporting, agrees and says as KiwiSaver grows, he expects to see the benefits that come with “economies of scale” shared with members of KiwiSaver.

Growth spurt

The FMA’s report found fewer investors are selecting conservative KiwiSaver funds as a total proportion of funds and in March 2024, $19.2 billion was held in conservative funds by 766,023 investors.

This is down 10.3% from 854,098 investors who were invested in conservative funds in 2022. 

Growth funds have gone in the other direction and now represent 46% of total FUM with 1.5 million investors selecting a growth fund and $51.4 billion invested by the end of the March 2024 year. This has doubled from $24.5 billion in 2021.

“Contrasting this year’s report to previous years, we can see how investor behaviour has changed over time, together with the profile of the funds being selected. The FMA has said for some time that younger investors, saving for retirement, should consider funds with more growth assets, as these are more suited to a longer investment horizon,” Horner says.

“With KiwiSaver in its 17th year, investors have become more comfortable with the long-term nature of KiwiSaver. We believe this is why almost half of all KiwiSavers have moved towards more growth-oriented funds.”