KiwiSaver was designed to be a low cost savings scheme when it was set up in 2007.
But a Treasury report released last year found KiwiSaver fees were in the upper third of comparable countries in the OECD.
The top 10 mutual funds in the United States had an average expense ratio of 0.22 per cent while the majority of fees for KiwiSaver funds from 2012 to 2014 ranged from 0.5 per cent to 1.5 per cent of assets under management per year.
While KiwiSaver fees have come down as a percentage of total assets falling from 2.2 per cent in 2009 to 1.95 per cent in 2014 the dollar value has continued to climb as funds under management have grown because savers are charged a percentage of their account balance.
In 2014 AMP cut its fees as it competed to win re-selection for default provider status.
But so far providers were doing little to compete on fees, Treasury found.
Research by Consumer NZ released this week showed the main reason people switch KiwiSaver providers is to go to their bank scheme or to move from a default fund despite people having the lowest satisfaction levels over fees and investment returns.
David Boyle, group manager investor education at the Commission for Financial Capability, said part of the problem was that people don't know what they are paying.
"I bet today you won't find anyone on the street who knows their KiwiSaver fee."
Providers have to disclose their fees as part of quarterly reports available online.
Fees are broken down into an annual admin fee which is typically up to $60 per year and a percentage of what you have in your account for management.
But people are not great at working out percentages.
Boyle has been pushing to get providers to put a dollar figure in their annual statements to make it much clearer how much people are paying.
What can consumers do?
• ask your provider for a dollar figure on how much you have been charged in fees
• use the fund finder tool on sorted.org.nz to compare the fees for your fund to other funds in the same category
• consider comparing low cost funds by checking out what services they offer, comparing websites and returns
The Financial Markets Authority has a mandate to ensure KiwiSaver fees are not unreasonable which at the moment mainly means it ensures providers disclose their fees.
Paul Gregory, head of investor capability at the FMA, said it had queried new entrants on charging fees that appeared out of wack with the rest of the market in the past.
Next week it will release new research on what savers want to see in annual statements which is expected to show demand for a dollar figure.
It is hoped that data will be used to help shape a review of annual statements being undertaken by the Ministry for Business, Innovation and Employment.
Owen Gill, executive director of Workplace Savings, an industry body for KiwiSaver providers said while the fee total seemed like a lot of money, savers had benefited from paying that money to gain expertise.
"If your balance has gone up four or five per cent every year you have definitely got something for it."
Gill said splitting the $1.3 billion cost over KiwiSaver's 2.6 million members showed people had paid roughly $500 each which was not a lot of money for a scheme which was now quite sophisticated.
Gill said KiwiSaver providers had spent a lot of money setting up their systems from scratch when the scheme was launched in 2007 and regulatory requirements had increased since then adding to provider costs.
"Plus you have got the cost of running them."
He urged savers to look at the performance of their funds after fees and investment returns.
" For individual KiwiSaver clients, the real test is net performance (post-fees) of their investment, per-annum."
Andreas Heuser, a senior analyst at Treasury, who worked on the KiwiSaver research said as funds under management rose the cost per consumer should not climb at the same rate.
The best thing people can do to make sure they are getting a good deal is to look critically at their appetite for risk, stage in life and fees they are being charged for the service and returns they are getting.
"We definitely could use a bit more pressure from consumers to make sure they [KiwiSaver providers] are giving the best deal they can to members."
How much savers have paid to KiwiSaver providers
Year to March 31 Money in KiwiSaver Fees Paid
2008 $701.7 million $4.67 million
2009 $2.65 billion $31.4 million
2010 $5.85 billion $64.7 million
2011 $9.19 billion $95.3 million
2012 $12.74 billion $137.5 million
2013 $16.56 billion $178.3 million
2014 $21.40 billion $220.9 million
2015 $28.47 billion $269 million
2016 $33.90 billion $318.6 million*
Estimated total spend on fees to March 31 2016 $1.32 billion
based on FMA and Reserve Bank data.
*estimate based on 0.95 per cent of funds under management which was the ratio for fees in the 2015 year.
