Westpac KiwiSaver Scheme Review
Updated 3 January 2020
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 a 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; $1 per month ($12 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 fund charge of between 0.44% and 0.94% of your investment balance. These fees are competitive with similar KiwiSaver schemes that offer actively managed diversified funds.
- 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, alternative assets (such as hedge funds) and listed overseas property
- Up to date balances instantly available via the Westpac Internet Banking website and/or Westpac app.
CONS
- Generally, annual fund charges are much higher than the low-fee, index-following funds offered by Simplicity, SuperLife and even ASB (but competitive with similar KiwiSaver schemes that offer actively managed diversified funds).
- 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 six funds has a unique risk indicator (1 = lowest, 7 = highest) and an annual fund charge, as well as distinct investment profiles:
1: 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 and Australian banks. Westpac KiwiSaver's Statement of Investment Policy and Objectives (SIPO) permits the cash fund to invest in units in other funds/other securities.
Target investment mix:
We say: The 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 and Australian banks. Westpac KiwiSaver's Statement of Investment Policy and Objectives (SIPO) permits the cash fund to invest in units in other funds/other securities.
- Average annual return (pre-tax) since fund launch (2007): ~3%
- Annual fund charge: 0.44%
- Risk indicator: 1
- Expected annual return: Note disclosed
Target investment mix:
- Cash and cash equivalents 100%
We say: The 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: Default Fund
This fund invests predominantly in low-risk asset - 33% in cash and cash equivalents, 47% in fixed interest assets and 20% in 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.
Target investment mix:
We say: The 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 entities holding high credit ratings. There is a 20% exposure to growth assets, covering Australasia and established markets such as the UK, USA and Japan. The fund offers investors the prospect of a higher return when compared to the Cash fund, with a small 0.10% fee increase.
This fund invests predominantly in low-risk asset - 33% in cash and cash equivalents, 47% in fixed interest assets and 20% in 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 fund charge: 0.54%
- Risk indicator: 2
- Expected annual return: Not disclosed
Target investment mix:
- 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 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 entities holding high credit ratings. There is a 20% exposure to growth assets, covering Australasia and established markets such as the UK, USA and Japan. The fund offers investors the prospect of a higher return when compared to the Cash fund, with a small 0.10% fee increase.
3: 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.
Target investment mix:
We say: The Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 75% 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 fund charge: 0.73%
- Risk indicator: 3
- Expected annual return: Not disclosed
Target investment mix:
- Cash and cash equivalents: 20%
- NZ fixed interest: 24%
- International fixed interest: 31%
- Listed Property: 4%
- Australasian Equities: 9%
- Global Equities: 10%
- Other (Alternative Investments, which can include hedge funds and absolute return funds): 2%
We say: The Conservative Fund aims for moderate returns, but stays relatively risk-free by allocating a weighty 75% 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: 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).
Target investment mix:
We say: The Moderate Fund has a target to allocate 60% of funds to cash and fixed interest assets, with a 35% target for equities and alternative investments. The underlying investment allocation targets make the Moderate Fund a medium-risk investment option.
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 fund charge: 0.80%
- Risk indicator: 3
- Expected annual return: Not disclosed
Target investment mix:
- Cash and cash equivalents: 10%
- NZ fixed interest: 22%
- International fixed interest: 28%
- Listed Property: 5%
- Australasian Equities: 13%
- Global Equities: 17%
- Other (Alternative Investments, which can include hedge funds and absolute return funds): 5%
We say: The Moderate Fund has a target to allocate 60% of funds to cash and fixed interest assets, with a 35% target for equities and alternative investments. The underlying investment allocation targets make the Moderate Fund a medium-risk investment option.
5: 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).
Target investment mix:
We say: The Balanced Fund offers a 60:40 target allocation to growth and income assets respectively, conforming to the industry norm for balanced funds. The fund's largest assets are shares, meaning the day-to-day performance can go up and down based on the movements of local and global markets. The fund is designed to make a positive return 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 fund charge: 0.87%
- Risk indicator: 3
- Expected annual return: Not disclosed
Target investment mix:
- Cash and cash equivalents: 5%
- NZ fixed interest: 15%
- International fixed interest: 20%
- Listed Property: 5%
- Australasian Equities: 20%
- Global Equities: 29%
- Other (Alternative Investments, which can include hedge funds and absolute return funds): 6%
We say: The Balanced Fund offers a 60:40 target allocation to growth and income assets respectively, conforming to the industry norm for balanced funds. The fund's largest assets are shares, meaning the day-to-day performance can go up and down based on the movements of local and global markets. The fund is designed to make a positive return in the long-term.
6: Growth Fund
This fund invests 80% of its money in growth assets (equities, listed property and alternative assets such as hedge funds and absolute return funds), with 20% exposure to income assets (cash and cash equivalents and fixed interest). Recent investments held included A2 Milk Company Ltd (~2.50%), Spark New Zealand Ltd (~1.50%) and Fisher & Paykel Healthcare Ltd (~1.50%), among others, indicating the large number of assets held.
Target investment mix:
We say: The 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% allocated to 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, listed property and alternative assets such as hedge funds and absolute return funds), with 20% exposure to income assets (cash and cash equivalents and fixed interest). Recent investments held included A2 Milk Company Ltd (~2.50%), Spark New Zealand Ltd (~1.50%) and Fisher & Paykel Healthcare Ltd (~1.50%), among others, indicating the large number of assets held.
- Average annual return (pre-tax) since fund launch (2007): ~6.50%
- Annual fund charge: 0.94%
- Risk indicator: 3
- Expected annual return: Not disclosed
Target investment mix:
- Cash and cash equivalents: 4%
- NZ fixed interest: 7%
- International fixed interest: 9%
- Listed Property: 10%
- Australasian Equities: 25%
- Global Equities: 37%
- Other (Alternative Investments, which can include hedge funds and absolute return funds): 8%
We say: The 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% allocated to 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 execute a range of investment strategies. 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 annual fund charges are still well above low-fee index fund competitors (one being Simplicity, which offers a fixed 0.31% annual fund charge) which is one third of the 0.94% Westpac charges for its Growth fund.
- Depending on your KiwiSaver balance, other funds with other KiwiSaver schemes can have cheaper annual fund charges, with an example presented in the table below.
- For example, the fee difference between the Simplicity Growth Fund (0.31%) and Westpac's 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 Westpac's 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 annual fund charges 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 fund charges.
- 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 indicator (1 = lowest, 7 = highest). Unlike most other KiwiSaver growth funds which are rated '4', the 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 Cash Fund), meaning that the funds are not following an overly aggressive growth strategy.
Annual Fund Charge Comparison: How Westpac's 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 Fund Charge: 0.31% of total investment plus a $30 membership fee
ASB Growth Fund Annual Fund Charge: 0.64% of total investment plus a $30 membership fee
Westpac's Growth Fund Annual Fund Charge: 0.94% of total investment plus a $12 membership fee
ANZ Growth Fund Annual Fund Charge: 1.10% of total investment plus a $24 membership fee
AMP Growth Fund Annual Fund Charge: 1.29% of total investment plus a $23.40 membership fee
ASB Growth Fund Annual Fund Charge: 0.64% of total investment plus a $30 membership fee
Westpac's Growth Fund Annual Fund Charge: 0.94% of total investment plus a $12 membership fee
ANZ Growth Fund Annual Fund Charge: 1.10% of total investment plus a $24 membership fee
AMP Growth Fund Annual Fund Charge: 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 |
11.52% per fund update |
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 KiwiSaver 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 a 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 $12.00 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 managedKey investment manager personnel are generally the same across all of the six funds who make investment decisions as outlined in the SIPO. Westpac publishes detailed quarterly fund updates which illustrate major underlying assets in each fund, performance vs benchmark and fees information. 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 six funds - cash, default, conservative, moderate, balanced and growth, are free of buzzwords or spin.
Generally, if you're looking for an 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 in 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 basisPerformance data of every fund 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 invest in 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, local and global bonds, alternative assets, 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 fund charge. This is expected to be offset by the long-term performance of the fund.
- The scheme is the third largest KiwiSaver provider, with $6 billion of total KiwiSaver money spread over six 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.
