BNZ KiwiSaver Scheme Review
Our guide to the BNZ KiwiSaver scheme looks at the fund choices, fees and options available to KiwiSaver members
Updated 12 October 2021
Summary of the BNZ KiwiSaver Scheme
- BNZ operates six funds, with around $4 billion under management. The funds range from low-risk cash, conservative and balanced funds, to a higher-risk growth fund.
- BNZ’s funds use index management for international asset classes, while using active management for Australian and New Zealand assets. BNZ has chosen this approach as they see an opportunity for active management to add value in these smaller markets.
- The BNZ has been aggressive in lowering fees, dropping its membership fee altogether in May 2019 saving members around $23/year. It also reduced the annual management fees to a maximum of 0.45% p.a. in September 2021.
- There are no performance fees - many KiwiSaver fund managers take a bite of any market-beating returns - BNZ KiwiSaver does not.
- Switching between any BNZ KiwiSaver fund is free. There are no joining fees or exit fees if you take your money to another fund.
BNZ KiwiSaver Pros & Cons
PROS
CONS
- Six funds that offer a sliding scale of risk and return, clearly defined in investor statements
- All funds, other than the cash fund, have a mix of active and index management. BNZ has identified New Zealand and Australian assets as investments where active management can deliver value for members.
- Investments are diversified and include cash deposits, NZ government bonds and NZ corporate bonds, international bonds, New Zealand shares and global equities.
- The BNZ commits to responsible investing, and excludes companies involved in the production of cluster munitions, anti-personnel mines, nuclear weapons and tobacco or tobacco products.
- Up to date fund performance and balances are available 24/7 via the BNZ website.
- FlyBuys members can convert their points to BNZ KiwiSaver contributions (currently 108 points = $20).
CONS
- No life/age program option, which moves your money into more conservative (i.e. less risky) funds as you get older as a way to protect your KiwiSaver balance, is offered.
Read this First: Fees, Performance and Understanding What's Best For Your Situation
A lot of media attention focuses on KiwiSaver fees, but this is only one thing to consider when picking the most suitable provider and fund for your retirement needs. We believe that being comfortable with what you're investing in is the most important aspect of saving for your retirement, not the fee you'll pay.
Our Review
In this guide, we outline what the BNZ KiwiSaver scheme is, what funds they offer to KiwiSaver members and how they're different to other funds, as well as looking at alternatives and the level of fees involved.
Please note: MoneyHub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of BNZ KiwiSaver as a KiwiSaver investment option.
This Guide covers:
A lot of media attention focuses on KiwiSaver fees, but this is only one thing to consider when picking the most suitable provider and fund for your retirement needs. We believe that being comfortable with what you're investing in is the most important aspect of saving for your retirement, not the fee you'll pay.
Our Review
In this guide, we outline what the BNZ KiwiSaver scheme is, what funds they offer to KiwiSaver members and how they're different to other funds, as well as looking at alternatives and the level of fees involved.
Please note: MoneyHub is not a Financial Adviser, and this guide has been published to explain the investment fundamentals and outline the pros and cons of BNZ KiwiSaver as a KiwiSaver investment option.
This Guide covers:
The Specs of the BNZ KiwiSaver Funds, fund fees and explaining where your money is invested
- The BNZ KiwiSaver Scheme is managed by BNZ Investment Services Limited, the investment arm of the BNZ.
- Up-to-date fund performance data is available on the BNZ website under 'How our funds are tracking'.
- Each of the six funds has a unique risk factor (1 = lowest, 7 = highest) and an annual management fee, as well as distinct investment profiles:
1: BNZ Cash Fund
This fund invests solely in income assets of a short-term nature such as bank deposits, floating rate notes and money market securities with New Zealand-registered banks.
Investment Composition:
We say: The Cash Fund is the most conservative BNZ fund, with the aim of providing stable returns over the short term, investing 100% of the fund into cash products such as term deposits and on-call accounts. The Cash Fund historically offers the lowest fees and reports the lowest historical return among all the BNZ KiwiSaver funds.
This fund invests solely in income assets of a short-term nature such as bank deposits, floating rate notes and money market securities with New Zealand-registered banks.
- Average annual net return since fund launch (2013): ~2%
- Annual fee: 0.30%
- Risk factor: 1
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: no minimum (as this is cash-based fund, there is very little risk of any investments falling in value)
Investment Composition:
- Cash and cash equivalents 100%
We say: The Cash Fund is the most conservative BNZ fund, with the aim of providing stable returns over the short term, investing 100% of the fund into cash products such as term deposits and on-call accounts. The Cash Fund historically offers the lowest fees and reports the lowest historical return among all the BNZ KiwiSaver funds.
2: BNZ First Home Buyer Fund
This is BNZ's second most conservative fund, investing 85% in cash-based assets (bank deposits, term deposits etc) and 15% into growth assets, such as international shares. The fund is designed to appeal to investors looking to use their KiwiSaver savings to purchase a first home (see our KiwiSaver First-Home Withdrawal guide) in three to five years, or investors with a cautious approach to investing.
Investment Composition:
We say: The BNZ has designed a fund to maximize the benefits of the First-Home Withdrawal program while keeping savings relatively safe. The aim is to let savers build up a fund which can be withdrawn around settlement date to give homeowners the strongest financial position possible. The First Home Buyer Fund is mostly risk-free as it invests in bank deposits, with a small portion of money (15%) allocated to international shares which can go up and down in the short term. The idea of the 15% proportion in growth investments is to grow the fund at a higher rate than the Cash Fund while not risking too much money.
This is BNZ's second most conservative fund, investing 85% in cash-based assets (bank deposits, term deposits etc) and 15% into growth assets, such as international shares. The fund is designed to appeal to investors looking to use their KiwiSaver savings to purchase a first home (see our KiwiSaver First-Home Withdrawal guide) in three to five years, or investors with a cautious approach to investing.
- Average annual net return since fund launch (2013): ~3.00%
- Annual fee: 0.45%
- Risk factor: 2
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: First home buyers: 3-5 years. Other investors: 1-5 years
Investment Composition:
- Cash & cash equivalents: 60%
- International fixed interest: 19%
- New Zealand fixed interest: 6%
- International equities: 10%
- Australasian equities: 5%
We say: The BNZ has designed a fund to maximize the benefits of the First-Home Withdrawal program while keeping savings relatively safe. The aim is to let savers build up a fund which can be withdrawn around settlement date to give homeowners the strongest financial position possible. The First Home Buyer Fund is mostly risk-free as it invests in bank deposits, with a small portion of money (15%) allocated to international shares which can go up and down in the short term. The idea of the 15% proportion in growth investments is to grow the fund at a higher rate than the Cash Fund while not risking too much money.
3: BNZ Conservative Fund
This is a BNZ fund that's slightly more aggressive than the First Home Buyer fund, but a step back from the Moderate fund. Investments are around 35% in cash-based assets (bank deposits, term deposits etc) and 20% into growth assets, such as international shares. This fund is designed for those not wanting to be overly exposed to global sharemarket movements, but at the same time don't want to miss out on the benefits from increasing share prices.
Investment Composition:
We say: The BNZ Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 80% of the fund to safe, income-producing assets such as bank deposits and government bonds. BNZ, unlike other KiwiSaver funds offering 25% and/or 30% growth assets exposure, jumps from the 20% growth allocation in the Conservative fund to 35% for the Moderate fund with nothing in between.
This is a BNZ fund that's slightly more aggressive than the First Home Buyer fund, but a step back from the Moderate fund. Investments are around 35% in cash-based assets (bank deposits, term deposits etc) and 20% into growth assets, such as international shares. This fund is designed for those not wanting to be overly exposed to global sharemarket movements, but at the same time don't want to miss out on the benefits from increasing share prices.
- Average annual net return since fund launch (2013): ~4.00%
- Annual fee: 0.45%
- Risk factor: 2
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: 3 years
Investment Composition:
- Cash & cash equivalents: 35%
- International fixed interest: 34%
- New Zealand fixed interest: 11%
- International equities: 14%
- Australasian equities: 6%
We say: The BNZ Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 80% of the fund to safe, income-producing assets such as bank deposits and government bonds. BNZ, unlike other KiwiSaver funds offering 25% and/or 30% growth assets exposure, jumps from the 20% growth allocation in the Conservative fund to 35% for the Moderate fund with nothing in between.
4: BNZ Moderate Fund
This fund invests 65% of its money in income assets (cash and fixed interest) and 35% in growth assets (Australian and international shares).
Investment Composition target:
We say: The BNZ Moderate Fund sits midway between the conservative Cash fund and the Growth fund. The fund invests 41% of its money in international fixed interest (government bonds, company debt), while 35% is allocated to local and international shares. Given the exposure to international sharemarkets, day to day returns will be up and down, but overall the fund expects positive returns in the long-term. The BNZ suggests a five year minimum investment period for this reason.
This fund invests 65% of its money in income assets (cash and fixed interest) and 35% in growth assets (Australian and international shares).
- Average annual net return since fund launch (2013): ~5.0%
- Annual fee: 0.45%
- Risk factor: 3
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: 5 years
Investment Composition target:
- Cash & cash equivalents: 10%
- International fixed interest: 41%
- New Zealand fixed interest: 14%
- International equities: 24%
- Australasian equities: 11%
We say: The BNZ Moderate Fund sits midway between the conservative Cash fund and the Growth fund. The fund invests 41% of its money in international fixed interest (government bonds, company debt), while 35% is allocated to local and international shares. Given the exposure to international sharemarkets, day to day returns will be up and down, but overall the fund expects positive returns in the long-term. The BNZ suggests a five year minimum investment period for this reason.
5: BNZ Balanced Fund
This fund allocates a 50:50 split of money between income-producing investments (such as cash deposits, term deposits and bonds) and growth investments (international and New Zealand shares). The fund is designed for long-term investment and to take advantage of both investment types - fixed returns for income-producing assets, share price rises and dividends for growth assets).
Investment Composition target:
We say: The BNZ Balanced Fund is perfectly balanced' in terms of income vs growth investments, with a 34% exposure to both international fixed interest and international sharemarkets. This by definition is a balanced fund, and would be popular with anyone looking for a medium-risk KiwiSaver fund. Given the 50% exposure to growth assets, the day to day will be up and down, but overall the fund is designed to make positive returns over the long-term. As such, the BNZ suggests a seven-year minimum investment period.
This fund allocates a 50:50 split of money between income-producing investments (such as cash deposits, term deposits and bonds) and growth investments (international and New Zealand shares). The fund is designed for long-term investment and to take advantage of both investment types - fixed returns for income-producing assets, share price rises and dividends for growth assets).
- Average annual net return since fund launch (2013): ~7.00%
- Annual fee: 0.45%
- Risk factor: 3
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: 7 years
Investment Composition target:
- Cash & cash equivalents: 5%
- International fixed interest: 34%
- New Zealand fixed interest: 11%
- International equities: 34%
- Australasian equities: 16%
We say: The BNZ Balanced Fund is perfectly balanced' in terms of income vs growth investments, with a 34% exposure to both international fixed interest and international sharemarkets. This by definition is a balanced fund, and would be popular with anyone looking for a medium-risk KiwiSaver fund. Given the 50% exposure to growth assets, the day to day will be up and down, but overall the fund is designed to make positive returns over the long-term. As such, the BNZ suggests a seven-year minimum investment period.
6: BNZ Growth Fund
This fund invests 80% of its money in growth assets (equities and listed property), with 20% exposure to income assets (cash and cash equivalents and fixed interest). Investments include A2 Milk Company Ltd, Spark New Zealand Ltd and Fisher & Paykel Healthcare Ltd, among others.
We say: The Growth Fund is the most aggressive BNZ KiwiSaver fund, with 70% of money allocated to New Zealand and international shares. The biggest risk is that in the short term the value of the fund goes down if global markets drop, but in the long term the fund is expected to make returns above any fixed-income assets such as term deposits. 30% of the fund is retained for investments in fixed interest and bonds from government and companies with good credit ratings. Because of the investment profile, the value of the fund will go up and down daily. The Growth Fund is very much a long-term fund for this reason, and the BNZ suggests a ten year minimum investment period.
This fund invests 80% of its money in growth assets (equities and listed property), with 20% exposure to income assets (cash and cash equivalents and fixed interest). Investments include A2 Milk Company Ltd, Spark New Zealand Ltd and Fisher & Paykel Healthcare Ltd, among others.
- Average annual net return since fund launch (2013): ~8.00%
- Annual fee: 0.45%
- Risk factor: 4
- Expected annual return: Not disclosed
- Suggested minimum investment timeframe: 10 years
- Cash & cash equivalents: 5%
- International fixed interest: 19%
- New Zealand fixed interest: 6%
- International equities: 46%
- Australasian equities: 24%
We say: The Growth Fund is the most aggressive BNZ KiwiSaver fund, with 70% of money allocated to New Zealand and international shares. The biggest risk is that in the short term the value of the fund goes down if global markets drop, but in the long term the fund is expected to make returns above any fixed-income assets such as term deposits. 30% of the fund is retained for investments in fixed interest and bonds from government and companies with good credit ratings. Because of the investment profile, the value of the fund will go up and down daily. The Growth Fund is very much a long-term fund for this reason, and the BNZ suggests a ten year minimum investment period.
Who is BNZ KiwiSaver Suited To?
BNZ offers six funds, at much lower fees compared to similar schemes such as Westpac, AMP and ANZ. Yet, despite the low fees and zero membership fee, in reviewing the investment profile and composition of each BNZ KiwiSaver fund, we take the view that the offering is 'middle of the road', but one of the better bank schemes. Specifically, the historical returns are in line with the bulk of similarly structured KiwiSaver funds. In our view, it's an average offering, and better options are out there with specialist providers such as Milford, Fisher Funds, Simplicity, Booster and Generate.
Standout Features:
Be aware:
Standout Features:
- No membership or performance fees, and a commitment from the BNZ to lower management fees has recently seen Balanced and Growth fund fees nearly halve. This means you get to keep more of your money.
- The Fly Buys conversion is unique, and although Westpac offers a points-to-money KiwiSaver conversion, the BNZ offers a much better KiwiSaver scheme overall.
- The dedicated First Home Buyer fund is unique to KiwiSaver, and a popular option for anyone tracking towards making their first home purchase.
- It's free to change funds. You can move between funds as often as you like.
- The scheme has an active responsible investment policy, which includes environmental, social, and governance (ESG) considerations. More details are outlined here.
Be aware:
- There is no life/age program option, which moves your money into more conservative (i.e. less risky) funds as you get older as a way to protect your KiwiSaver balance. This means you'll need to do it manually if you want to protect your KiwiSaver nest egg from market movements.
- As with any investment, markets go up and down. The Dotcom bubble in the early 2000s sank global sharemarkets, as did the 2008 Global Financial Crisis. While many global sharemarkets are now at record highs, this is no guarantee of future earnings.
- BNZ KiwiSaver's default fund, the Conservative fund, lacks growth potential given its low exposure to shares (20% of the portfolio). While default funds are required by law to have growth assets of between 15 and 25%, this means unaware savers lose out on potential returns by staying with the default option. We spoke to the BNZ, who commented that the "BNZ regularly proactively contacts members in the default option to encourage them to make an active decision".
The Bottom Line
- BNZ KiwiSaver fund fees are low, and with zero annual membership fees, those with lower balances can find value for money alongside low-fee competitors such as Simplicity. However, bigger balances are less competitive - for example, Simplicity's Growth fund offers a fixed 0.31% annual fund management fee) which is two thirds of the 0.45% BNZ charges for its Growth fund.
- Depending on your KiwiSaver balance, other funds on other platforms can have cheaper management fees and have historically higher returns. Banks in New Zealand make a lot of money from KiwiSaver, and the BNZ is no exception, despite the commitment to lower fees.
- It's important to keep in mind that no two funds are directly comparable, so it's essential to shop around and compare fund objectives as well as fund fees if you're serious about having the biggest KiwiSaver nest-egg possible.
- There are no joining fees, no exit fees, no performance fees, no annual fees, and you can transfer between funds for free as many times as you want.
- In terms of risk, each fund has a risk number (1 = lowest, 7 = highest). BNZ's only '4-rated is the Growth fund, suggesting that all other funds are low to moderate risk.
7 things to know about the BNZ KiwiSaver scheme
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The BNZ KiwiSaver Scheme is small in comparison to the other banksBecause BNZ only launched its first KiwiSaver funds in 2013, the ANZ, ASB and Westpac have a much more dominant position. However, bigger does not always mean best, and bank funds are yet to report market-leading returns. The BNZ has around 5% of the total KiwiSaver funds under management, well below Westpac's 12%, as a point of comparison.
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No matter what your employer's default KiwiSaver provider or fund is, you are entitled to select a BNZ KiwiSaver fundYour employer may offer another default KiwiSaver provider, but you are free to choose BNZ KiwiSaver as your provider if you feel it's right for you.
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There is no minimum investment and it's easy to take contribution holidaysIf you want to contribute to your fund at a level above your fixed salary contribution, you can do this via the app, online banking or manually by contacting a BNZ branch.
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Dividends your fund receives are reinvested, meaning more cash is invested on your behalfFive of the six BNZ KiwiSaver funds invest in shares, and many will pay dividends. These cash payments represent the profits from companies returning it to the shareholders, i.e. you. When a company declares a dividend, your fund will receive money and it is re-invested into more shares, growing the value of your fund.
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The performance data is easy to follow, and updated on a regular basisWith the six funds in operation, there is 5+ years of performance data, with quarterly fund performance details published here. As a member, you can also check a fund balance 24/7 by logging in to BNZ internet banking or using the BNZ mobile app.
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​Signing up to BNZ KiwiSaver isn't complicated, but you’ll need to decide what fund to invest in firstSigning up to BNZ's KiwiSaver scheme is easy, but you’ll need to decide your fund first. Helpfully, the names of the six funds - cash, first home buyer, conservative, moderate, balanced and growth, are free of buzzwords or spin.
Generally, if you're looking for a safe investment with a lower risk of seeing your original investment fall, a conservative fund could be a suitable option. But many investment professionals wouldn't suggest being in a conservative fund for the long term. If you're not sure of what to invest in and want to have a range of options to pick from, look at our KiwiSaver fund comparison tool which includes the six BNZ KiwiSaver funds, with data supplied by the Financial Markets Authority. |
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The Default BNZ KiwiSaver fund, the Conservative fund, may not be appropriate for your KiwiSaver needsIf you have been enrolled into the BNZ KiwiSaver scheme by default due to your employer, you will be put in the BNZ KiwiSaver Conservative Fund. Currently, this fund is larger than any other BNZ KiwiSaver fund (around $700 million), but has historically reported the second-lowest returns.
If you are in this fund and would prefer a more aggressive fund with slightly higher fees and the possibility of better returns, you have the option to switch free of charge. You can switch to another BNZ KiwiSaver fund or any other KiwiSaver fund operated by another scheme. |
Conclusion ​
- BNZ is trying to shake up the KiwiSaver fund market when it comes to bank offerings, and for investors with lower balances, there are clear advantages in its offering.
- With around $4 billion with lower-than-other-bank fees, the returns to date are in-line with other bank funds, although a drop in fees will hopefully flow through to benefit investor returns beyond 2021.
- Ultimately, our view is that the BNZ funds are adequate for the ordinary KiwiSaver member, and we will be updating this review as the effects of their 2021 fee drop flow on to returns.
- With around half of the scheme's funds sitting in low-risk conservative and moderate funds, current members could find themselves missing out on the returns being produced by other providers. The BNZ does its best to limit this risk, confirming that they "regularly, proactively contact members asking them to review their fund choice, and (that they) contact default members even more often to encourage them to make an active choice".
- With five of the six funds, investors can get exposure to the New Zealand sharemarket, Australian sharemarket, emerging markets, local and global bonds, global property as well as New Zealand cash deposits.
- Like all KiwiSaver funds, and managed funds in general, there is a risk of negative returns if the investment doesn't perform. This applies to both active or passive fund management.
Do you have experience with the BNZ KiwiSaver scheme that you would like to share with our readers? Email our research team who would be delighted to hear from you.
