KiwiSaver statements: a suggestion

My wife and I spent over an hour this weekend trying to answer a simple question: how much money did my KiwiSaver account earn? This should be straightforward. After all, the whole reason for having a superannuation/retirement savings account is for it to grow. An important part of that growth is the return on investment.

My fund doesn’t make it easy to figure out the return. I could easily find the current value of my account, but not how much I had invested or earned.  I don’t know how the other providers are, but the little I’ve heard indicates they aren’t any better. So, let me make a suggestion: KiwiSaver providers should be required to provide easily-understandable statements that show:

• the value of the account
• the amount of funds deposited
• the amount of earnings
• the rate of return.

Back to our weekend’s work. The first thing I did was look at the general statements of asset class and fund performance. The stated performance of the fund, which is an index fund, was 1.12% in the three months to 31 January. The reported asset class performances were all for the three month to 31 December, so aren’t for the same period. Nevertheless, I calculated an expected return based on asset class weightings:

 Weighting Return Asset class 1 2.0% 2.5% Asset class 2 6.0% 2.9% Asset class 3 12.0% 1.3% Asset class 4 10.0% 7.1% Asset class 5 25.0% 1.9% Asset class 6 45.0% 7.5% Return 5.0%

What has this told me? Well, not much. I don’t know whether the difference between 5.0% and 1.12% is due to the time period, the fund’s actual allocation across asset classes, performance of the fund’s individual investments, or something else. I can’t evaluate my investment or the fund’s performance.

Next, I figured that a statement of transactions would help. It did, but not immediately. This provider reports transactions through the ‘sweep’ account. The account lists all the money deposited by the employee, employer, and government. But, each deposit is then swept into the investment accounts. That means that each credit is offset by a debit. When they calculate the fund balance, the credits and debits sum to zero. Not very informative.

I had to copy the list of transactions from the webpage and paste them into a spreadsheet, then find the total just for the incoming transactions. This isn’t hard — for someone who does this sort of data manipulation for a living — but why should I have to do it? It’s a simple piece of information that should be provided.

Once I calculated my deposits, I could figure out my earnings from the difference between deposits and current fund value. Taking an annual view, I calculated my return at about 2%. Not very satisfying, and certainly not the 5% I calculated for the 3 months to 31 January. Of course, this isn’t the actual return. The real return calculation would look at the changes to the account over time — when each deposit was made and how the account grew during the year.

I emailed the provider and asked them to tell me how much money my investment made. They replied the next day (hurrah!) with a 13-page PDF of my account history (what?). They said:

In your call [sic], you requested we calculate the ‘Real return’ of your account. We take this to mean the return on your account after fees, taxation and inflation. Unfortunately, this is not something we offer investors. There are many different ways returns can be calculated; the published returns of the [fund] reflect the industry standard.

This is not something they offer investors. Let that sink in. They don’t offer investors that key piece of information — how their investments actually performed. And why not? Well, because it isn’t the industry standard.

This is my suggestion: let’s make it the industry standard. Let’s require that KiwiSaver funds tell us how much we — each one of us individually — have actually made on our investments. The Government wants us to save more? The financial industry wants our savings? That’s fine. Tell us what we get for our money.

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§ 6 Responses to KiwiSaver statements: a suggestion

• You have choice among KiwiSaver providers. Surely you could ask a few of them what sort of information on returns they provide, let us all know, and then we (and you!) can choose the ones that are more transparent.

I’ve been pretty happy with NZUSS – low fees, plenty of detail; alas, only open to folks in the Uni system.

• Bill says:

Alas, it isn’t that simple. I originally chose this provider because of the kind of fund offered. I looked at several providers and no other one offered this sort of index fund. So, both transparency and fund design are inputs to the decision.
Then there is that pesky problem of time. It takes time to do the research, time to write the letters, time to change providers. Yes, I could do it. And so could the next person and the next person. But that’s a lot of time spent chasing information that should be readily available.

• That’s why I want YOU to do it and publish results.

• Andrew says:

I understand your frustration in trying to determine the return on your KiwiSaver account. At Gareth Morgan KiwiSaver Ltd we try hard to make it easy for members to have a full and clear understanding of what’s happening to their savings:

• We report to each individual member their simple returns as well as their time weighted rate of return

• We report returns after all fees, costs and taxes at each individual’s nominated personal tax rate

• We show members their return against an appropriate benchmark, so that over time our members can judge investment manager performance

• And most importantly we are complaint with the Global Investment Performance Standards (GIPS), and our GIPS compliance has been independently verified from 1 October 2007 through to 31 December 2011

We impose rigorous performance standards on ourselves, and we subject these standards to independent verification. It is our hope that we can lead the KiwiSaver industry in the right direction. Information on our GIPS compliance can be found here: http://www.gmi.co.nz/kiwisaver/performance-returns.aspx

Kind Regards
Andrew Gawith

• Bill says:

Thanks, Andrew. I’ll have to check it out. Does this mean GMI is competing on transparency?

• Hi Bill

Transparency is fundamental to understanding investment performance data – the more transparent providers are about their investments the easier it is for investors to make reliable comparisons of performance.

I wouldn’t claim that we are perfectly transparent but I think we have helped raise the standards in the funds management industry.

So, yes, transparency is an area that creates a point of difference for GMI.

Regards
Andrew Gawith

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