Warning on KiwiSaver charges

Only two of the nine Governmentappointed KiwiSaver default providers have decreased their charges following a Government review of fees.

Minister of Commerce and Consumer Affairs Kris Faafoi said that while seven of the nine default providers made no changes, he was pleased at reductions by ANZ and Kiwi Wealth (Kiwibank).

This would lead to an estimated

$1 million in fee savings for KiwiSaver members over the next four years.

The default providers which opted not to lower their fees were ASB, AMP, BNZ, BT (Westpac), Fisher Funds, Booster, and Mercer.

Faafoi said the review wasn’t aimed at pressuring providers to drop fees, but he warned them that the process of appointing the next default providers would start in

2019, and fees would play a significant part in that.

ANZ agreed to drop total fees by

0.02 percentage points, while Kiwi Wealth’s fees will drop by 0.05 percentage points.

The fund fees each KiwiSaver pays are calculated as a percentage of their balance, meaning that as balances rise, the dollar sums earned by scheme providers rise.

Over 20, 30, and 40-year periods, even small differences had a big impact on the final retirement nest eggs.

Competition is building in the KiwiSaver market, with low-cost passive KiwiSaver scheme Simplicity having made a lot of noise in the past 12 months claiming KiwiSaver fees are too high.

In September, a research paper published by AUT’s Bart Frijns and Alireza Tourani-Rad revealed KiwiSaver funds’ fees were above international standards and not justifiable given their ‘‘relatively poor performance since inception’’.