Cullen: Time for KiwiSaver fees to drop
KiwiSaver founder Sir Michael Cullen says it’s time for fees to drop. ‘‘There is certainly space for KiwiSaver fees to start coming down now that so many of the funds have bulked up substantially,’’ the former deputy prime minister said.
Fees were quite high when KiwiSaver launched, Cullen said, and it was anticipated that over time, economies of scale would see them fall.
But since then, nine KiwiSaver schemes have bust through the billion-dollar mark, and fees remain high compared to super schemes from other countries.
Cullen believes lower expected returns on shares and bonds, and
"There is certainly space for KiwiSaver fees to start coming down."
the launch of the low-cost Simplicity KiwiSaver scheme, will put pressure on fees to drop.
He wouldn’t say how far KiwiSaver fees should fall. ‘‘I would just suggest that should be the direction of change.’’
The industry went from four billion-dollar plus schemes in 2012 to nine in 2015, and investment management and ‘‘member’’ fees went from $125million to just under $300m.
In 2015, Treasury reported that ‘‘overall’’ the KiwiSaver market appeared to be competitive, and growing concentration in the hands of the big banks, was not concerning ‘‘per se’’ because economies of scale should lead to cost reductions.
Treasury said as KiwiSaver balances had risen, annual fees as a percentage of those savings had fallen from 2.2 per cent in 2009 to 1.95 per cent in 2014.
Compared to other OECD countries the cost of running KiwiSaver schemes was right in the middle of the pack, but KiwiSaver fees put the New Zealand among the most expensive third of countries to save in.
But, Treasury said: ‘‘It appears... consumer demand is not motivated by fee levels of funds; rather, demand appears to follow returns and larger fund size.’’