Many KiwiSavers unaware of fees and returns

Many KiwiSavers are unaware of how much they are paying in fees. Photo/Steven McNicholl.

New research shows many Kiwis don't know how much they are paying for KiwiSaver or what returns they are getting - two of the biggest factors in determining how much a person can have at retirement.

A joint survey by the Commission for Financial Capability and market watchdog the Financial Markets Authority found 47 per cent of people did not know how much they were being charged to have their savings managed and a further 20 per cent were unsure.

Just 33 per cent knew roughly how much they were paying in fees.

The research which was carried out online this week as part of money week also revealed people are much more likely to know how much money they have in their account than the returns on their investment.

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Of those questioned 89 per cent knew their KiwiSaver balance to within $5000 while just 54 per cent knew what their return was over the last year.

Over 36 per cent said they knew what the returns had been on their fund over the last five years.

David Boyle, group manager investor education for the commission said fees and returns could make a big difference to the lump sum people ended up with when they retire.

"If you think it's not a big deal understanding the impacts of your fees and returns, you might change your mind when you find out what a difference both could make to the lump sum you end up with when you retire."

Over a lifetime of contributing to KiwiSaver, the average amount paid in fees is around $40,000.

A person who saves from the age of 18 until 65 in a balanced KiwiSaver fund could end up with around $357,000 at retirement.

But Boyle said the cost of fees could be higher or lower than $40,000 depending on what your provider charges.

"The trick is to look at similar funds to yours and see how the costs compare and what sort of investment returns they have earned."

He questioned why people would pay more unless they were being offered something extra in return.

Most of us are pretty careful about other kinds of fees - you wouldn't take on a real estate agent without finding out what it was going to cost you.

David Boyle

"Nor would you pay someone $60 to mow your lawns if you could get it done for $40 - unless they trimmed your hedges too.

"So why pay KiwiSaver fees without knowing how much they are and what you are receiving over and above the cost of managing your money?"

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People can find out how much their fees are on the sorted website by using the fund finder tool or by looking at their annual statement.

Some fees on the annual statement are given at a percentage and Boyle said many people say it is no easy to understand what that means in hard cash.

Work is underway by the government to make providers show a dollar figure in the future.

The survey also asked people if they expected their fees to go up as they saved more and nearly two thirds said they expected them to stay the same.

But the dollar amount savers pay is likely to rise as balances keep growing because fees are charged as a percent of the money managed.

"This shows people may not understand how the fees are charged on their investment, but it's also important for KiwiSaver members to look at the returns after fees," Boyle said.

See the latest survey here: