KiwiSaver funds are continuing to build momentum following the downturn caused by Covid-19, with total funds under management reaching $81 billion.
The Financial Markets Authority's annual KiwiSaver report showed the sharp market rebound in the year to March 2021 resulted in investment returns skyrocketing to $13.2 billion, compared to the previous year's $820 million loss.
Member withdrawals reached more than $3 billion, including $1.4 billion for first homes (up 18.8 percent), $1.2 billion for over-65s (down 8.3 percent) and $159.3 million for significant hardship (up 42.8 percent).
The FMA's director of investment management Paul Gregory said the past year was momentous for KiwiSaver.
"This was also a year of significant shifts in regulatory focus for KiwiSaver providers. We published two important pieces of guidance for fund managers - one focused on the accurate labelling of funds when it comes to claims of ethical and responsible investments, the second focusing on value for money.
"Reflecting on our guidance and the government's changes to the default providers coming into effect in December, we believe both will improve outcomes for investors, impacts which will play out over the long term."
The report also showed that total fee revenue increased at a slower rate than funds under management due to the high returns this year. While total funds of $81 billion grew by 31.7 percent, total fee revenue of $650 million was up 20.7 percent.
Gregory said fee revenue grew because it was percentage based, and was not a sign that fees were increasing.
"Our focus on value for money over several years has been based on providers generally not been passing on the benefits of KiwiSaver's growing scale. More recently there are some encouraging signs: several managers have reduced their investment management percentage fees to increase the value provided to their investors," he said.
The government's recent changes to default providers would provide significant value to people in default funds, Gregory said.
The report also showed that only a small minority of investors were choosing funds explicitly labelled as responsible or ethical, but research showed that many were expecting providers to take a responsible approach to investing their money.
There were just over 377,000 fund switches during the year, down 9.3 percent on the year before, which covered the volatile February-March 2020, but 57.2 percent higher than the more "normal" year ended March 2019.
FMA-commissioned research found fewer than 10 percent of those who switched to a lower risk fund between February to April 2020, returned to a higher growth fund by August.
Gregory said it meant 90 percent effectively locked in their losses.