Inside Money: KiwiSaver - where do the dollars go?

Photo / Hawkes Bay Today

Research house Morningstar gets an extra star for its performance-enhanced KiwiSaver survey.

The survey, published by The New Zealand Herald this week, features some nice little upgrades such as reporting the funds under management of every KiwiSaver investment portfolio Morningstar tracks (which is not yet the whole market).

News reports focused on performance figures but Morningstar's tables also include some useful fee information.

For example, even at the conservative end of the business there is a surprising divergence of fees, ranging from 0.28 per cent for the ASB Conservative fund up to 0.98 per cent for the, now-defunct, Asteron Conservative product.

There may very well be good reasons for this disparity in headline fees for what should be pretty similar products - I can't say. The issue is further clouded by other 'administration' fees that most providers charge each KiwiSaver member (again the rates vary).

As an experiment I decided to convert the percentage management fees and administration levies reported by Morningstar into actual dollar revenue for a single provider.

I randomly selected the first company on the list, which happened to be AMP.

By cross-referencing the size of AMP's KiwiSaver portfolios (I excluded some AMP funds that were sourced from other providers) with the reported management fee for each fund, I calculated that - assuming no change to fund size or members - over the next year, AMP will earn about $4.2 million for managing its KiwiSaver money. But the Australian-headquartered group will make even more for administering its KiwiSaver funds.

Based on a membership number of about 130,000 as at the end of June (the industry group Workplace Savings lists AMP KiwiSaver numbers at 126,000 as at March 31 this year), AMP will earn almost $4.7 million in administration fees over the coming 12 months.

So all up, ignoring the inevitable increase in funds and members it will experience over the next year, AMP will earn almost $9 million out of KiwiSaver - that's probably an underestimate.

Is that a lot? I don't know. The real question is whether AMP is making any profit out of that $9 million.

Why don't you work out how much your favourite KiwiSaver provider will earn in the year ahead - go on, you know you want to.



David Chaplin