"It can be tens of thousands of dollars. Over time, it's quite amazing. Let's look at a typical young employee in KiwiSaver for 45 years. If everything else is equal, their savings might total $398,500 if their provider's percentage fees are 0.5 per cent a year, or $360,400 if the fees are 1 per cent a year."
Morningstar's Chris Douglas said investors should be careful what they paid, particularly for conservative funds. "If it's predominantly in cash and fixed interest and has targeted low to mid single-digit growth comparable to a term deposit, paying a high fee against that can take a meaningful amount of the performance of that investment."
He said new quarterly disclosure requirements made it easier for investors to see what they were being charged. "I'm not saying high fee funds are necessarily bad but you have to understand what you're paying and what you're getting for that. If it's a fairly vanilla investment you should be paying a low fee."
AMP's head of wealth management transformation David Wallace said AMP's member fees had dropped 30 per cent across the board, not just in its default scheme. AMP was charging $35.40 and 0.53 per cent in variable fees for its default scheme. From July, it will charge $23.40 and 0.39 per cent.
Sites such as Sorted's Kiwisaver Fundfinder can be used to compare KiwiSaver options.
Choosing a fund
Most KiwiSaver members who are enrolled when they start a new job end up in one of the default schemes, unless their employer has a preferred provider arrangement.
From July there will be nine, which are all invested conservatively.
If you're in a default scheme, you can change out at any time.
Conservative funds are good for people who need their money soon, because they're near 65 or want to use it to buy a house.
But for a longer investment period you're better off in a growth or aggressive fund.
ANZ estimates that people who stay in conservative funds could miss out on more than $70,000 over their working lives.
Growth and aggressive funds are volatile, but over time the higher highs should balance out the periods when the funds underperform in conservative options.
Over the past five years, growth funds have achieved a 10 per cent return every year, compared to 6.3 per cent for the conservative funds.
Lack of transparency
Te Arapera Tauri has saved about $13,000 in Westpac's default KiwiSaver fund. She won't change from the conservative scheme to a more aggressive one. She wanted the money in a low-risk investment because she was saving for a house deposit and doesn't want any big losses. When the new default scheme fees kick in, the fees she pays will drop from $132.48, if her balance remains the same, to $98.50, saving her $33.98 in one year. Tauri said she didn't mind paying fees on the roughly $650 she received in returns last year, but was concerned that she hadn't been aware what they were. "I just would have preferred to know."
