KiwiSaver fees down, returns a mixed bag

KiwiSaver fees have fallen in the past year, but so have average returns for funds with a higher proportion of share investments.

Based on an account balance of $20,000, the average annual fee on a growth fund has dropped by 8 per cent in the past year to $181.64, research by Canstar has shown.

Balanced funds also saw a 6 per cent drop in the average annual fee to $160.79 while conservative funds saw the smallest drop of 4 per cent to $122.49.

Providers have been under the pump to do better on fees with both the regulator — the Financial Markets Authority — and the Government putting the spotlight on them.

A review of the KiwiSaver default providers, launched this year, will also take account of fees when it comes to appointing the providers for the next seven year term. The current term ends in 2021.

Jose George, Canstar New Zealand general manager, said pressure on providers to lower fees was having an impact. “The move toward lower fees is heartening to see — it shows providers are working hard to improve net returns over the long term for their members.”

Competition at the cheapest end of the market has heated up this year with BNZ cutting its fees to compete with low cost providers Simplicity and Juno.

But returns have been more mixed. Average net returns on growth funds dropped to 7.77 per cent this year from 9.01 per cent in 2018, while balanced funds dropped to 6.45 per cent from last year’s 6.61 per cent.

Conservative funds, which have a lower investment in shares, were up — rising from 4.54 per cent last year to 5.28 per cent.

Sharemarkets have been choppy this year amid fears of the US-China trade wars. Jose said the lower returns for growth and balanced funds reflected their asset allocations.

But he said deeper analysis of the data also showed some poorly performing funds had pulled the market average down.

“We also saw some notably impressive performances across different investment profiles.”

Jose said KiwiSaver was a longterm investment and there was no silver bullet to finding the right fund.

“It’s about doing the research and making sure your provider is delivering for your needs, including risk appetite and life stage.”