KEY POINTS:
Questions have been raised about the accuracy of the Retirement Commission's KiwiSaver fee calculator.
Some KiwiSaver providers say the commission has got it wrong after tests of the fee calculator on its sorted.org.nz website revealed the providers were charging some of the highest fees.
The commission
launched the calculator just over a week ago to make it easier for people to compare the fees of different providers, and allow them to make a more informed decision about which fund and provider to choose.
The Business Herald tried the calculator using the average income of a salary or wage earner of $44,315 a year, with a 4 per cent contribution by both the employee and the employer.
Results showed that for a 55-year-old with an average income, insurance company Fidelity Life had the most expensive fund in both the lowest and highest risk categories and was the fourth most expensive provider in the medium risk category.
The Credit Union KiwiSaver scheme, which is known for its low-cost approach to helping union members, also scored very highly as the second most expensive fund in the low risk category, sixth most expensive provider in the medium risk and fifth most expensive in the high risk category.
Both said they would question the figures.
"It can't be right," said Fidelity Life managing director Milton Jennings. "We had a look at our fee structure compared to others and to us it looked quite reasonable."
Jennings said Fidelity's funds were outsourced to a range of investment managers including Tyndall and ING, and it used a manager selection approach which allowed it to move portions of investors' money if a particular manager's performance dropped.
Jennings said he was concerned that other KiwiSaver providers, which did not outsource their management, were concealing costs within their business structures.
"We need to make sure others are disclosing as much as we are."
Edward Newbigin, spokesman for the Association of Credit Unions, said he was surprised to hear that the Credit Union was one of the highest fee chargers as its aim was to make KiwiSaver affordable.
He said the company had undertaken a lot of research before selecting Mercer as its provider and while it would be covering the costs of setting up the programme it was not out to make money on the scheme.
After going back to Mercer, Newbigin said the Credit Union would be consulting the commission.
"We have been unable to reconcile our figures with the fee calculator." Newbigin said that because there were a number of assumptions built into the calculator it also did not make the process very transparent.
However the Credit Union stood by its scheme as being an affordable option.
Retirement Commission spokesman David Kneebone said it had been through an extensive process to check the information with providers since it first began gathering fee data in June last year.
After gathering the data it took the figures back to every provider to confirm before launching a model which providers were invited to test. And it asked an independent panel to review it.
He said the difficulty in gathering the correct information from investment prospectuses had highlighted the issue of fee transparency and the difficulty that an individual would have to get the information themselves.
Actuary John Melville, who helped to put the calculator together, said the process had been rigorous.
"With 30 to 40 providers, some of which have up to 20 different products, it was no easy task. But we developed a model that would deal with all possible types as it applies to money flows."
www.sorted.co.nz
