KiwiSaver fees back in spotlight

KiwiSaver fees are back in the spotlight, with the Government consulting on how providers will calculate and display scheme charges to members.  

The Government has ruled KiwiSaver providers will have to show the dollar figure for any scheme fees as part of their annual statements, effective March 2018.

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“The annual statement offers a unique opportunity for providers to engage with their investors, and help them make good decisions about their investment,” Financial Markets Authority (FMA) director of external communications and investor capability Paul Gregory says in a media release.

“We discovered in last year’s survey that KiwiSaver investors do read their statements and have a strong appetite for information that aids their decision-making. Investors told us that one of the pieces of information they wanted to see is their fees in dollars,” Mr Gregory says.

The FMA is yet to rule on how providers will have to calculate and display KiwiSaver scheme fees, but has proposed a method as part of its latest KiwiSaver consultation.

The proposed calculation method involves working out the KiwiSaver member’s average balance over the relevant accounting period and multiplying it by the actual total fund charges as a percentage of the average net value of the asset.

This is what’s known as a “total expense ratio calculation”, you can read more on the FMA’s proposed method in the consultation document.

FMA closes its consultation on 5 May.

Looking at KiwiSaver fees as part of the overall investment picture 

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Every year, CANSTAR assesses KiwiSaver funds, including looking at fees. And, according to the most recent report, there is a wide range in level of fees charged by providers.

CANSTAR’s research calculates minimum, average and maximum fees based on an account balance of $11,500 across the different fund types.

Looking at growth funds for example, fees charged for this fund type start at a minimum of $107.51 and go up to a maximum of $218,26.

But KiwiSaver members should remember fees are only part of the investment picture, there is more to take into account. For starters, it’s understandable there will be some fees attached, given you’re paying for someone to manage and invest for you.

Another point to remember when considering fees and fund type/KiwiSaver provider is that you need to compare like with like. For example, comparing a conservative fund with a conservative fund will not necessarily give you a clear picture of the fee environment. The more growth assets in a fund, the more expensive it is to manage and, therefore, you’d expect the fees to be higher in these fund types too.

In general, you can expect a better long-term return from growth assets; the higher the risk, the higher the potential returns, but also the higher he potential losses can be.

But what is up to you, is checking you are getting value from those fees and that you are checking the KiwiSaver market to see what’s out there.

While you’re checking your KiwiSaver balance online, for example, why not have a look at what is happening in the KiwiSaver market and compare providers?

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