KiwiSaver statements: a suggestion
21/03/2012 § 6 Comments
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:
|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%|
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.