The number of employer-based superannuation schemes in New Zealand could shrink to 20 – including KiwiSaver funds – within a few years, according to an Auckland academic.
Michael Littlewood, who heads the Retirement Policy and Research Centre (RPPC) at the University of Auckland, said the advent of KiwiSaver would only accelerate the closure of other employer-sponsored savings schemes – a trend which has already been underway for years in New Zealand.
Littlewood said a new RPPC study has confirmed that KiwiSaver is putting traditional workplace super in New Zealand under threat. The RPPC ‘Top 100 report’, which received responses from 52 of New Zealand’s largest employers, found that 12 employers had already decided to close existing schemes because of KiwiSaver. Another 14 schemes have applied for exempt status, which allows them to operate as normal while also receiving some of the KiwiSaver benefits, while 12 employers have added a fully-complying KiwiSaver fund to their existing schemes.
A further 17 employers are “taking other steps of various kinds” such as reviewing their remuneration policies in light of KiwiSaver. Only one employer in the survey group had converted an existing superannuation fund into a KiwiSaver scheme.
The RPPC survey also found that 75 per cent of those employers with open savings schemes would not have started such funds if KiwiSaver had been an option at the time. “This may mean that most of those currently open plans will also be closed to new entrants,” the RPPC study says. “We think this is a significant finding and gives a strong pointer on the future of workplace saving schemes other than KiwiSaver.”
The latest New Zealand government statistics record there were 576 registered superannuation schemes at the end of 2006 representing just over NZ$13 billion in funds under management. However, only 77 of these schemes held more than NZ$50 million in assets. (The data did not include the approximately NZ$4 billion managed by the country’s largest scheme, the now-closed defined benefit Government Superannuation Fund.)
Only 54 registered super schemes were stand-alone corporate funds with most employers having already transitioned to one of the 23 master funds on offer as at the end of 2006. There are also currently 54 registered KiwiSaver schemes, although only approximately 40 of these funds are open to the public.
Littlewood said consolidation in the KiwiSaver and superannuation market was “inevitable”. Athough he is well-known as a trenchant critic of KiwiSaver, Littlewood is also a director of SuperLife – a New Zealand-based superannuation and insurance provider which also offers a KiwiSaver scheme.