The num­ber’s up for hid­den nest egg fees

Guard­ing your Ki­wisaver against un­fore­seen fees is about to be­come a lit­tle eas­ier – but you’ll still need to do your home­work.

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story in­stead of them hav­ing a pre­con­ceived idea, hav­ing read it some­where.’’

She says Paul Holmes’ death had been the cat­a­lyst for that ini­tial move.

‘‘After Paul passed away I re­alised how im­por­tant it was to me to have parental fig­ures in my life. I’ve been com­ing to Greece to visit my dad since I was about 10,

It’s scary how easy it is to be ma­nip­u­lated by num­bers. Mar­keters know ex­actly how to frame sales and promos to get you to buy, buy, buy. Politi­cians fid­dle with sta­tis­tics to make them­selves look good. Com­pa­nies use cre­ative ac­count­ing to try to down­play a poor per­for­mance. It’s not ly­ing ex­actly, but it is pretty cyn­i­cal.

Prac­ti­tion­ers of the dark art of per­sua­sion have learned that small dif­fer­ences in the way in­for­ma­tion is pre­sented can have a big im­pact on our de­ci­sions.

This is why it’s bril­liant news that all Ki­wiSaver providers are be­ing forced to be more trans­par­ent. As of this month, the state­ments you re­ceive will spell out the fees you pay in sim­ple dol­lars and cents.

Some providers, like ASB, have been vol­un­tar­ily do­ing this for years, but many oth­ers have not.

Chances are you’ll be see­ing the num­ber for the first time, in which case it could be a shock. Un­der the cur­rent model, you usu­ally pay a flat fee of $30 or so, then per­haps one-pointsome­thing per cent of your bal­ance.

That might sound like pocket change, but grow­ing ac­count bal­ances mean it’s start­ing to be­come a very big deal. As some peo­ple are about to find out, they’re al­ready pay­ing over $1000 a year in fees – and we’re only 10 years into the scheme.

Let’s say you join Ki­wiSaver at age 20, and re­tire at 65. Over that time, you might end up pay­ing any­where from $8000 to well over $100,000 in fees, de­pend­ing en­tirely on which fund you’re in.

That’s just the tip of the ice­berg. Ev­ery dol­lar that goes to a fund man­ager is a dol­lar that could have been earn­ing you sev­eral decades worth of com­pound in­ter­est. Over a life­time of in­vest­ing, the real im­pact is hun­dreds of thou­sands of dol­lars.

Hope­fully star­ing those num­bers in the face will give you the mo­ti­va­tion to re­assess which Ki­wiSaver scheme is right for you.

While fees are im­por­tant, the first thing to de­cide is what level of risk you want – from a de­fen­sive cash fund, to an ag­gres­sive fund in­vest­ing in prop­erty and shares, or any­thing in be­tween. Sorted’s Fund Finder is a handy tool for fig­ur­ing this out. Riskier funds are gen­er­ally more ex­pen­sive, but that’s com­pen­sated for by higher in­vest­ment re­turns.

Once you’ve cho­sen your risk pro­file, you’ll no­tice there’s still a mas­sive gulf in the fees charged by providers – from low­cost ‘‘pas­sive’’ man­agers, who sim­ply buy and hold a small slice of thou­sands of com­pa­nies, to ‘‘ac­tive’’ man­agers who try to pick hot stocks and sec­tors, and charge sig­nif­i­cantly more.

The over­whelm­ing weight of re­search sug­gests ac­tive man­agers can’t con­sis­tently beat the av­er­age mar­ket re­turn. They might do well in any given year, but you’d ex­pect that purely by chance. The only con­stant is the fees. Lo­cal fund man­agers ar­gue that New Zealand is small enough that the ‘‘ef­fi­cient mar­kets’’ the­ory doesn’t ap­ply. Per­son­ally, I don’t buy it, but you’ll have to make up your own mind.

Ki­wiSaver fees were sup­posed to get cheaper as the scheme scaled up, but that hasn’t re­ally hap­pened. Per­haps this new era of trans­parency will sharpen up the com­pe­ti­tion be­tween providers, but I wouldn’t count on it. In­stead, do your home­work on the best scheme, and be sure to vote with your feet.

Per­haps this new era of trans­parency will sharpen up the com­pe­ti­tion be­tween providers, but I wouldn’t count on it.’

Got a burn­ing money ques­tion? Email Bud­get Buster at richard.mead­ows@thedeep­dish.org, or hit him up on Face­book, where you can also find links to pre­vi­ous Bud­get Busters.

MIllie is happy with her new life in Greece – in­clud­ing her chef boyfriend Kostas Sara­pa­pas, left, dad Stratis Ka­banas, and English bull­dog Miko.

Keep­ing your nest egg safe means get­ting to grips with hid­den costs and fees.

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