Jacqueline (not her real name) has $90,000 in her KiwiSaver account - but she's angry she has no idea how fees charged by her provider have affected her eventual nest egg.

She has been in KiwiSaver from launch, earns about $55,000 a year but was surprised to discover her undisclosed fees may well be almost double what she pays for her mobile phone each year.

The average lifetime cost of KiwiSaver fees has been calculated at $40,000 by the Commission for Financial Capability. "Lifetime" means saving from ages 18 to 65, so over 47 years the fees will carry an average annual cost of about $850.

While a mobile phone is not an investment, Jacqueline says the $40 she pays a month, or $480 a year, to her phone provider is at least visible - and believes most KiwiSaver members would be similarly taken aback.


"I had no idea KiwiSaver fees could be that high," says Jacqueline. "I am going to find out exactly what they are and see whether I am getting good value for money. If not, I'll definitely look at whether I need to change providers."

Jacqueline is not alone. The Financial Markets Authority's 'Your KiwiSaver Money' survey this month, in conjunction with the CFFC, showed more than two-thirds of respondents didn't know how much their fees cost. Nearly half were unsure how much their KiwiSaver earned them this year.

Many New Zealanders will find KiwiSaver fees costing more than their mobile phones. Figures from the Commerce Commission's 2015 annual telecommunications monitoring report say a typical mobile customer spends $720 a year.

The level of fees charged and level of investment return make a big difference to the amount of KiwiSaver money available at retirement - and the FMA is on a mission to make sure investors understand that impact and can make well-informed choices.

"With investment fees, it's important to check you get what you pay for," says Paul Gregory, FMA's director of external communications and investor capability. "You should only pay higher costs if you're confident you'll be consistently compensated with returns high enough to make it more financially worthwhile than an investment with lower costs."

For example, the FMA says, if you invest $10,000 over 15 years in an investment with a 6 per cent return, you'll end up with an extra $1794 by choosing a fund with a 0.65 per cent fee versus a 1.65 per cent fee.

However, if you're confident that, by paying the higher 1.65 per cent fee, you'll make a 7 per cent return on your $10,000 investment, the higher cost will be worthwhile. That's because your return after fees would be higher than if you'd paid lower fees and achieved a 6 per cent return.

The FMA, the CFFC and the Ministry of Business, Innovation and Employment are pressing KiwiSaver providers to make fees visible as a dollar value in annual statements, rather than just showing investment returns after fees and tax - to help members make better-informed choices.


"Most providers currently show fees as percentages in their marketing material," says Gregory. "Small percentage differences can mask how much impact investment management fees have in actual dollar terms."

The issue is a large one for how well New Zealand performs as a nation of savers. In the year to June 30, 2015, New Zealanders paid $251.2 million in KiwiSaver fees.

The 'Your KiwiSaver money ' survey by the FMA and CFFC showed 94 per cent of consumers surveyed want to see a dollar amount on their annual KiwiSaver statement. But nearly two-thirds said they expected the fees to stay the same, in dollar terms, as their accounts grew.

"This shows people may not understand investment management fees are charged as a percentage of their account balance," says Gregory.

But how do individual KiwiSaver members compare costs between various providers? It is made more complicated by the array of fees charged.

The Fund Finder at sorted.org.nz compares KiwiSaver funds at various points on the risk spectrum by returns, services provided and fees charged. It shows that, among aggressive funds (for example), fees range from 0.95 per cent to 3.33 per cent. Five-year returns range from positive 16.09 per cent to negative 3.89 per cent - but the lowest-performing funds don't necessarily charge the lowest fees.

Managed funds, including KiwiSaver schemes, usually charge an administration or fixed membership fee, fees for managing investments, and sometimes a performance fee. The fixed membership fee ranges from $0 to $60 a year, with an average of $32 a year.

Investment management fees often aren't explicitly shown - investors just see a figure showing the investment return after fees and tax.

However, in the FMA's most recent survey, high fees were the thing most likely to prompt investors to make changes to their KiwiSaver accounts.

Gregory says: "All providers have a contact channel of some sort on their website and people should question their providers about fees. If their provider persists in providing only a percentage, customers can point out net returns (investment returns less tax and fees) are provided in the annual statement - so it is reasonable to expect the dollar amount paid in fees can be disclosed."

The FMA says there are three things to look out for:
• Active funds - those that aim to outperform an index - tend to be more expensive than passive funds, or "index trackers", because more investment skill is needed to beat the index consistently. But investors need to be comfortable the skill is actually there before they invest. Look for a fund that does better than its index more years than not - particularly in bad years for the index.

• Fees may be charged for leaving an investment early - for example, early termination fees if you take money out of a term deposit before the end of the fixed term.

• Look at all the fees charged by providers. Looking only at one type of fee can be misleading because providers set up their fees differently. For example, some providers include their membership fee within their management fee, while others charge them separately.

Read more from FMA here