Tamsyn Parker

Money Editor for NZ Herald

Savers warned to check KiwiSaver fees

How much of your retirement savings is going to your KiwiSaver provider? Photo/Warren Buckland.
How much of your retirement savings is going to your KiwiSaver provider? Photo/Warren Buckland.

KiwiSaver members should pay close attention to how much their providers are charging to manage their retirement savings, a global research firm has warned.

Morningstar, which analyses the performance of most KiwiSaver funds on a three monthly basis, says there is a "huge variance" in what providers are charging and higher cost does not always translate to better returns for savers.

"Given the amount of information available to investors, it is in investors' best interests to investigate how much of their return is being taken by their provider," said Chris Douglas, co-head of fund research for Morningstar Australasia.

How much a provider charges has become much easier to analyse and compare since new quarterly reporting rules were introduced earlier this year forcing providers to report their costs in a comparable way.

The quarterly reports are not sent out to savers but are available on the provider's website.

Publication of the figures has allowed research firms, including Morningstar, to insert the figures in its research.

Government-funded website sorted.org.nz also has a tool where savers can compare the cost of their fund to others which are similar.

KiwiSaver has been a hot topic this week with industry lobby group the Financial Services Council launching a campaign calling for the tax on KiwiSaver to be slashed.

The Morningstar research found costs for conservative funds averaged 0.72 per cent of funds under management.

The cheapest fund, ASB's conservative default fund, charged 0.38 per cent while the most expensive was the Aon Russell Lifepoints fund which charged 1.05 per cent.

The Aon fund is the best performing fund in the conservative category over the last five years with an annual average return of 9.9 per cent while the ASB fund is 7th out of 12 funds in the sector with an average return of 6.1 per cent per annum.

In the balanced fund category the average cost was 0.97 per cent but funds ranged from 0.61 to 1.29 per cent.

While in the growth category the average was 1.12 per cent while the range was 0.66 per cent to 1.99 per cent.

The percentage is worked out by adding together the management fees and additional expenses such as trading fees, legal fees, auditor fees and other operational expenses and dividing it by the total amount of money managed in the fund.

The annual member fee is on top of these costs.

Check out the report here to see how much your fund is costing you and how its performance stacks up.

The report also revealed the amount of money in KiwiSaver is now close to $20 billion.

As of June 30 the total market size was $19.938 billion.

The largest provider is ANZ Bank which manages $5.26 billion followed by ASB bank with $4.079 billion.

AMP is the third largest with $3.1 billion.

The eight largest providers manage 96.5 per cent of the assets.

Read the survey here:

- NZ Herald

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