Westpac KiwiSaver Scheme Review
Updated: Septembr 2018
Summary of Westpac KiwiSaver
- Westpac operates New Zealand's third largest KiwiSaver scheme, with approximately $6 billion under management. Close to 1 in 8 KiwiSaver members have chosen an Westpac fund to invest in.
- Westpac KiwiSaver offers six KiwiSaver funds, ranging from low-risk cash, default and balanced funds, to a higher-risk growth fund. All of the funds are actively managed by a fund manager, which increases fees compared to index-based funds.
- There are two types of fees; $2.25 per month ($27 per year) is charged for being a member of the Westpac KiwiSaver scheme, and once you start contributing to your fund, there is an annual management fee of between 0.44% and 0.94% of your investment balance.
- There are no performance fees, despite the funds being actively managed. Many KiwiSaver fund managers take a bite of any market-beating returns - Westpac KiwiSaver does not.
- Switching between any Westpac KiwiSaver fund is free. There are no joining fees or exit fees if you take your money to another fund.
Pros & Cons
PROS
CONS
PROS
- Six funds that offer a sliding scale of risk and return, clearly defined in investor statements
- Actively managed funds with diversity in investments, including cash, NZ government bonds and NZ corporate bonds to global equities, emerging market indicies and listed overseas property
- Up to date balances instantly available via the Westpac Internet Banking website and/or Westpac app.
CONS
- Generally, fund fees are much higher than the low-fee, index-following funds offered by Simplicity, SuperLife and even ASB
- 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.
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 Westpac 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 Westpac 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 Westpac 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 Westpac KiwiSaver as a KiwiSaver investment option.
This Guide covers:
THE SPECS of the Westpac KiwiSaver Funds, Fees and where your money is invested
- The Westpac KiwiSaver Scheme is managed by BT Funds Management (NZ) Limited (BT), the investment arm of Westpac in New Zealand.
- Up-to-date fund performance data is available on the Westpac website.
- Each of the five funds has a unique risk factor (1 = lowest, 7 = highest) and an annual management fee, as well as distinct investment profiles:
1: Westpac 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 Westpac Cash Fund is the most conservative fund, with the aim of providing stable returns over the short term. Returns are very unlikely to be negative - 100% of your money being invested in New Zealand banks holding high credit ratings. This fund historically offers the lowest fees and reports the lowest historical return among all the Westpac 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 return (pre-tax) since fund launch (2008): ~3%
- Annual fee: 0.44%
- Risk factor: 1
- Expected annual return: Note disclosed
Investment Composition:
- Cash and cash equivalents 100%
We say: The Westpac Cash Fund is the most conservative fund, with the aim of providing stable returns over the short term. Returns are very unlikely to be negative - 100% of your money being invested in New Zealand banks holding high credit ratings. This fund historically offers the lowest fees and reports the lowest historical return among all the Westpac KiwiSaver funds.
2: Westpac Default Fund
This fund invests mainly in cash and cash equivalents (80%), with a 20% exposure to growth assets (equities and listed property). The fund expects to make returns higher than the Cash Fund but lower than the Conservative Fund. The Default Fund is what it says it is, meaning it is intended as a temporary ‘parking space’ and may not be right for your investment needs.
Investment Composition target:
We say: The Westpac Default Fund is the second least aggressive fund, investing 80% of its money in income assets, such as New Zealand and international fixed interest with financial institutions, and governments holding high credit ratings (for example, New Zealand, Australia, USA etc). There is a 20% exposure to growth assets and property, covering Australasia and established economies such as the UK, USA and Japan. The fund offers investors the prospect of a higher return when compared to the Westpac Cash fund, with a small 0.10% fee increase.
This fund invests mainly in cash and cash equivalents (80%), with a 20% exposure to growth assets (equities and listed property). The fund expects to make returns higher than the Cash Fund but lower than the Conservative Fund. The Default Fund is what it says it is, meaning it is intended as a temporary ‘parking space’ and may not be right for your investment needs.
- Average annual return (pre-tax) since fund launch (2014): ~5.00%
- Annual fee: 0.54%
- Risk factor: 2
- Expected annual return: Not disclosed
Investment Composition target:
- Cash and cash equivalents: 33%
- New Zealand Fixed interest: 23%
- International Fixed Interest: 24%
- Australasian Equities: 8%
- Global Equities: 9%
- Listed Property: 3%
We say: The Westpac Default Fund is the second least aggressive fund, investing 80% of its money in income assets, such as New Zealand and international fixed interest with financial institutions, and governments holding high credit ratings (for example, New Zealand, Australia, USA etc). There is a 20% exposure to growth assets and property, covering Australasia and established economies such as the UK, USA and Japan. The fund offers investors the prospect of a higher return when compared to the Westpac Cash fund, with a small 0.10% fee increase.
3: Westpac Conservative Fund
This fund invests 75% in income assets (cash and cash equivalents and fixed interest), and 25% in growth assets (equities and listed property). The fund is slightly more aggressive than the Default fund but historically has seen similar returns.
Investment Composition target:
We say: The Westpac Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 75% of the fund to safe, income-producing assets such as bank deposits and government bonds. 23% of the fund is invested in shares in global companies and property assets.
This fund invests 75% in income assets (cash and cash equivalents and fixed interest), and 25% in growth assets (equities and listed property). The fund is slightly more aggressive than the Default fund but historically has seen similar returns.
- Average annual return (pre-tax) since fund launch (2007): ~5.00%
- Annual fee: 0.73%
- Risk factor: 3
- Expected annual return: Not disclosed
Investment Composition target:
- Cash and cash equivalents: 20%
- NZ fixed interest: 24%
- International fixed interest: 31%
- Listed Property: 4%
- Australasian Equities: 9%
- Global Equities: 10%
- Other: 2%
We say: The Westpac Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 75% of the fund to safe, income-producing assets such as bank deposits and government bonds. 23% of the fund is invested in shares in global companies and property assets.
4: Westpac Moderate Fund
This fund invests 60% of its money in income assets (cash and cash equivalents and fixed interest) and 40% in growth assets (equities and listed property).
Investment Composition target:
We say: The Westpac Moderate Fund sits midway between the conservative Cash fund and the aggressive Growth fund. The fund places weight on international fixed interest, such as global government bonds (28%), and global sharemarkets (30%), meaning returns day to day will be up and down, but overall the fund expects positive returns in the long-term.
This fund invests 60% of its money in income assets (cash and cash equivalents and fixed interest) and 40% in growth assets (equities and listed property).
- Average annual return (pre-tax) since fund launch (2014): ~6.50%
- Annual fee: 0.80%
- Risk factor: 3
- Expected annual return: Not disclosed
Investment Composition target:
- Cash and cash equivalents: 10%
- NZ fixed interest: 22%
- International fixed interest: 28%
- Listed Property: 5%
- Australasian Equities: 13%
- Global Equities: 17%
- Other: 5%
We say: The Westpac Moderate Fund sits midway between the conservative Cash fund and the aggressive Growth fund. The fund places weight on international fixed interest, such as global government bonds (28%), and global sharemarkets (30%), meaning returns day to day will be up and down, but overall the fund expects positive returns in the long-term.
5: Westpac Balanced Fund
This fund invests 40% of its money in income assets (cash and cash equivalents and fixed interest) and 60% in growth assets (equities and listed property).
Investment Composition target:
We say: The Westpac Balanced Fund is not entirely 'balanced' in terms of income vs growth investments, with 60% (rather than the normal 50%) of money being allocated to growth assets. The fund places weight on global government and corporate bonds (20%) and global sharemarkets (49%). The proportion of investment in growth assets means the day to day will be up and down, but overall the fund would make positive returns in the long-term.
This fund invests 40% of its money in income assets (cash and cash equivalents and fixed interest) and 60% in growth assets (equities and listed property).
- Average annual return (pre-tax) since fund launch (2007): ~6.00%
- Annual fee: 0.87%
- Risk factor: 3
- Expected annual return: Not diclosed
Investment Composition target:
- Cash and cash equivalents: 5%
- NZ fixed interest: 15%
- International fixed interest: 20%
- Listed Property: 5%
- Australasian Equities: 20%
- Global Equities: 29%
- Other: 6%
We say: The Westpac Balanced Fund is not entirely 'balanced' in terms of income vs growth investments, with 60% (rather than the normal 50%) of money being allocated to growth assets. The fund places weight on global government and corporate bonds (20%) and global sharemarkets (49%). The proportion of investment in growth assets means the day to day will be up and down, but overall the fund would make positive returns in the long-term.
6: Westpac 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.
Investment Composition target:
We say: The Westpac Growth Fund is the most aggressive Westpac KiwiSaver fund, with 80% of money allocated to international growth assets and property. Only 4% of the fund is invested in cash, with 16% chasing high-interest fixed interest and bonds from government and companies with a good credit rating. Because of the investment profile, the value of the fund will go up and down on a daily basis. The Growth Fund is very much a long-term fund for this reason.
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 return (pre-tax) since fund launch (2007): ~6.50%
- Annual fee: 0.94%
- Risk factor: 3
- Expected annual return: Not disclosed
Investment Composition target:
- Cash and cash equivalents: 4%
- NZ fixed interest: 7%
- International fixed interest: 9%
- Listed Property: 10%
- Australasian Equities: 25%
- Global Equities: 37%
- Other: 8%
We say: The Westpac Growth Fund is the most aggressive Westpac KiwiSaver fund, with 80% of money allocated to international growth assets and property. Only 4% of the fund is invested in cash, with 16% chasing high-interest fixed interest and bonds from government and companies with a good credit rating. Because of the investment profile, the value of the fund will go up and down on a daily basis. The Growth Fund is very much a long-term fund for this reason.
Westpac KiwiSaver - WHAT YOU NEED TO KNOW
Claims made by Westpac KiwiSaver
"We are one of New Zealand’s leading fund managers, with over $10 billion of funds under management as at 31 May 2017."
Is it true?
"Specialist investment managers, who we consider to be leaders in each particular asset class, carry out much of the selection of investments. They are based locally and globally".
Is it true?
"We are one of New Zealand’s leading fund managers, with over $10 billion of funds under management as at 31 May 2017."
Is it true?
- Yes, but only 60% of this balance represents KiwiSaver money. 40% of the funds under management is money outside of KiwiSaver, such as private investments.
- Westpac runs the third largest KiwiSaver scheme, after ANZ and ASB.
"Specialist investment managers, who we consider to be leaders in each particular asset class, carry out much of the selection of investments. They are based locally and globally".
Is it true?
- Yes. Westpac, through its investment company, BT Funds Management (NZ) Limited, employs analysts and fund managers to specifically buy and sell investments. The purpose is to buy shares in undervalued companies and sell them at a higher price in the short, medium or long term. Some of the fund management may be done outside of New Zealand when Westpac invests in another fund which has its own management.
Who is Westpac KiwiSaver Suited To?
Westpac offers six actively managed funds with fees well below competing schemes such as AMP and ANZ. If you're looking for active funds (as an alternative to index-trackers like Simplicity), the Westpac funds may meet your expectations. We see the Westpac offering as 'middle of the road'; the fees charged by each fund are not particularly competitive and the historical returns are in line with the bulk of similarly structured Kiwisaver funds.
Standout Features:
Be aware:
Standout Features:
- More competitive fees when compared to ANZ, AMP and other actively managed schemes
- No performance fees
- It's free to change funds; the monthly membership fee means you can move between funds as often as you like.
- The scheme has an active responsible investment policy prohibiting any money from being invested in weapons, tobacco and whale meat processing.
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.
- The Default fund is probably not appropriate for most investors given its low exposure to shares (17% of the portfolio) when compared to more aggressive funds.
The Bottom Line
- Westpac KiwiSaver fund fees are still well above low-fee competitors (one being Simplicity, which offers a fixed 0.31% annual fund management fee) which is one third of the 0.94% Westpac charges for its Growth fund.
- Depending on your KiwiSaver balance, other funds on other platforms can have cheaper management fees, with an example presented in the table below.
- For example, the fee difference between the Simplicity Growth Fund (0.31%) and Westpac Growth Fund (0.94%) for a $40,000 balance is 0.63% ($252 per year), or ~$6,300 over 25 years. It is also noted that Simplicity's Growth fund outperformed the Westpac Growth fund in the most recent year-to-date figures.
- 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.
- As an illustrative point, we have presented the annual performance of five growth funds below, as well as a table of their annual fees.
- The are no joining fees, no exit fees, no performance 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). Unlike most other KiwiSaver growth funds which are rated '4', the Westpac Growth Fund is rated 3 suggesting it's relatively less aggressive in its investing profile. The remainder of the funds are rated 2 or 3 (or 1 in the case of the Westpac Cash Fund), meaning that the funds are not following an overly aggressive growth strategy.
Fund Fee Comparison: How the Westpac Growth Fund compares alongside other
KiwiSaver Growth Funds
(KiwiSaver balances between $5,000 and $500,000)
KiwiSaver Growth Funds
(KiwiSaver balances between $5,000 and $500,000)
Balance |
Simplicity Growth Fund (0.31%) |
ASB Growth Fund (0.64%) |
Westpac Growth Fund (0.94%) |
ANZ Growth Fund (1.10%) |
AMP Growth Fund (1.29%) |
$5,000 |
$46 |
$62 |
$74 |
$79 |
$88 |
$15,000 |
$77 |
$126 |
$168 |
$189 |
$217 |
$40,000 |
$154 |
$286 |
$403 |
$464 |
$539 |
$100,000 |
$340 |
$670 |
$967 |
$1,124 |
$1,313 |
$500,000 |
$1,580 |
$3230 |
$4,727 |
$5,524 |
$6,473 |
Simplicity Growth Fund Annual Fee: 0.31% of total investment plus a $30 membership fee
ASB Growth Fund Annual Fee: 0.64% of total investment plus a $30 membership fee
Westpac Growth Fund Annual Fee: 0.94% of total investment plus a $27 membership fee
ANZ Growth Fund Annual Fee: 1.10% of total investment plus a $24 membership fee
AMP Growth Fund Annual Fee: 1.29% of total investment plus a $23.40 membership fee
ASB Growth Fund Annual Fee: 0.64% of total investment plus a $30 membership fee
Westpac Growth Fund Annual Fee: 0.94% of total investment plus a $27 membership fee
ANZ Growth Fund Annual Fee: 1.10% of total investment plus a $24 membership fee
AMP Growth Fund Annual Fee: 1.29% of total investment plus a $23.40 membership fee
Growth Funds - Annual Performance (before tax) to 30 June 2018
KiwiSaver Provider |
Annual return (after deductions for charges but before tax) to 30 June 2018 |
ASB |
11.64% per fund update |
Simplicity |
11.63% per fund update |
ANZ |
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Westpac |
11.21% per fund update |
AMP |
10.90% per fund update |
9 things to know about the Westpac KiwiSaver scheme
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Westpac KiwiSaver is New Zealand's third largest KiwiSaver schemeBigger does not always mean best, but with close to $6 billion under management for KiwSaver members, the six funds account for around 12% of the total KiwiSaver market. Westpac is very active in marketing its KiwiSaver funds, and when considering the number of Westpac customers (both business and personal), it is unsurprising that they are the third largest provider. .
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No matter what your employer's default KiwiSaver provider or fund is, you are entitled to select a Westpac KiwiSaver fundYour employer may offer another default KiwiSaver provider, but any KiwiSaver member has the right to pick any one of the 25+ providers and the fund they want. If you feel an Westpac KiwiSaver fund is right for you, then you can either join (if you're new to KiwiSaver) or switch your existing fund to Westpac.
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There is no minimum investment and it's easy to take contribution holidaysAs a Westpac KiwiSaver member, you'll pay an annual $27.00 membership fee. This gives you the freedom to invest as you like. And if 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 the client services team.
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Dividends your fund receives are reinvested, meaning more cash is invested on your behalfFive of the six Westpac 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. Despite being a cash payment, and as is the case with ALL KiwiSaver funds, there is no option to take this money as cash until you turn 65.
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All Westpac KiwiSaver funds are actively managed, ultimately aiming to beat the marketsWestpac KiwiSaver funds are actively managed meaning each fund has its own key personnel, tasked with the responsibility of portfolio management and analysis. This means that Westpac picks specific investments it sees as undervalued, anticipating that in time the value of the investment will grow and ultimately make a profit for the fund.
How does this work in practice? Westpac's fund manager takes a view and works within the target investment mix. For example, the target of 'Listed Property' is 3% for the Default fund. This allows the fund manager to invest up to 3% of the fund in assets that fall within the category of listed property (shares in a company that owns property as its primary business). The manager can use all of the allocation on one company, or diversify. In the case of the Default fund, 0.80% of the total fund comprises of Kiwi Property Group Ltd per the a recent fund performance report. This means the fund manager has chosen to invest around 27% of the property investment limit into one company. As market conditions change, the investment manager buys and sells individual investments as they see fit. We outlined the components of each of the five funds above to make it clear where your money is going. This is a target asset mix; the actual investments mix may variate +/- 1% as market conditions change the value of underlying investments every day. You can see an example of the target vs actual on page 3 of a Westpac update for the Growth fund. And remember, past fund performance is no guarantee of future results; what you ultimately invest in will be determined by your level of comfort with a fund. |
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​Signing up to Westpac KiwiSaver isn't complicated, but you’ll need to decide what fund to invest in firstSigning up to the Westpac KiwiSaver scheme is fast and easy, but you’ll need to decide your fund first. Helpfully, the names of the five funds - cash, default, conservative, moderate, balanced and growth, are free of buzzwords or spin.
Generally, if you're looking for a safe investment with the lowest risk of seeing your original investment fall, a conservative fund could be a suitable option. If you're looking for a higher return and are prepared to have your money in higher risk investments which could fall in value, balanced and growth funds operate in this manner. If you're not sure of what to invest in and want to have a range of options to pick from, look at Sorted's FundFinder tool which includes the Westpac KiwiSaver funds. |
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The Default Westpac KiwiSaver fund may not be appropriate for youIf you have been enrolled into the Westpac KiwiSaver scheme by default due to your employer, you will be put in the Default Fund. The Default fund invests 80% of its money into income assets such as term deposits and government bonds. If you are looking for a growth fund, this is probably not it.
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 Westpac KiwiSaver fund or any other KiwiSaver fund operated by another scheme. You can also opt-out of KiwiSaver altogether if you do not wish to participate. |
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The performance data is easy to follow, and updated on a regular basisWith the six funds in operation, there is 10+ years of performance data which is updated monthly here. As a member, you can also check a fund balance on a daily basis by logging in to the Westpac website or app.
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None of the funds invest specifically in New Zealand sharesFive of the six funds invest in shares, and many have significant holdings in major companies such as A2 Milk Company, Spark, Contact Energy and Fletcher Building. What investments are made is in the hands of the fund manager - no Westpac KiwiSaver fund has an investment mix that focuses solely on New Zealand opportunities.
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Our Conclusion​
- Westpac is not trying to shake up the KiwiSaver fund market with its offering - the fees are standard for bank-based funds, the returns are in-line with other funds from similar institutions, and the bank makes a healthy profit from managing KiwiSaver money every year.
- Our view is that Westpac enjoys its position as a top 3 KiwiSaver scheme (by size) and we believe the funds available are adequate for the ordinary KiwiSaver member.
- 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. The active management means particular shares will be bought, at the discretion of the fund manager, so there is a risk of negative returns if the investment doesn't perform.
- With every fund offered, the higher the weighting of growth assets vs income assets increases , the higher annual management fee. This is expected to be offset by the long-term performance of the fund.
- The scheme dominates KiwiSaver, with $6 billion of total KiwiSaver money spread over the six Westpac funds.
Do you have an experience with the Westpac KiwiSaver scheme that you would like to share with our readers? Email our research team who would be delighted to hear from you.
