Kiwisavers urged to compare fees to save
12 September 2013
Kiwisavers urged to compare fees to save
CANSTAR researches 29 KiwiSaver schemes and 91 KiwiSaver funds to determine outstanding value providers.
Since the commencement of KiwiSaver in 2007, an impressive 2.16 million New Zealanders have become KiwiSaver members. Even more impressively, 49% of those have opted in via their provider, indicating that at least half of all KiwiSaver members have made an active choice with regards to the investment of their funds.
From next month, thanks to the recent introduction of the KiwiSaver (Periodic Disclosure) Regulations, keen Kiwisavers will find it easier to compare funds on a like for like basis. Members should take a close look at the fees they are paying as CANSTAR research finds total fees payable in a balanced KiwiSaver fund can range from $63.75 to $135 annually based on a $7,500 balance.
“The new regulations require retail KiwiSaver schemes to report on funds in a standardised manner, including in relation to fees” said CANSTAR General Manager – New Zealand, Derek Bonnar. “The data will include a ‘total expense ratio’, which is the proportion of the value of savings absorbed that year by fees and expenses, including those in underlying funds. Fees can end up costing thousands of dollars over the life of an investment and disclosing them in an open way will mean more transparency for the saver. CANSTAR’s analysis found an average total annual fee of $101.59 on a KiwiSaver balance of $7,500, but the fees varied significantly between providers. I encourage all KiwiSaver investors to have a look at the total expense ratio of their fund and compare it with other products on the market.”
CANSTAR advise that investors should be aware of the following common fees:
Member Fee: A monthly or annual flat fee charged for being a member of the Fund. CANSTAR advise that a typical annual member fee will range from $0-$60, with the average annual member fee charged at $32.
Management Fee: The fee paid to fund managers for looking after the investments within the Fund. CANSTAR advise that a typical management fee will range from 0.18%-1.25%, with the average member fee charged at 0.73% of the fund balance.
Administration Fee: The administration fee is a separate fee from the management fee and goes toward the administration of the Fund. CANSTAR advise that a typical administration fee will range from 0-0.53%, with the average member fee charged at 0.14% of the fund balance.
Trustee Fee: This fee goes toward the cost of Trustees to supervise the fund’s performance in managing and administering the KiwiSaver Fund. This fee may be charged separately up to 0.08% or absorbed within the management or administration fee. The average trustee fee based on CANSTAR research is 0.03% of fund balance.
Expense Fee: The expense fee goes towards reimbursing the cost of third party expenses such as brokerage, auditing and stamp duty. CANSTAR advise that a typical expense fee will range from 0%-0.63%, with the average member fee charged at 0.11% of the fund balance. Some schemes may absorb fund expenses within their management fee.
“Investment returns fluctuate according to a myriad of economic and management factors, but fees are a constant, through good times and bad,” said Mr Bonnar. “It is easier for most investors to control the fees they pay rather than the return they receive.”
CANSTAR’s annual KiwiSaver star ratings report identifies a number of organisations who offer outstanding value for investors within various investment profiles.
“ASB are to be congratulated for achieving a five-star rating in each of the assessed profiles for the third year in a row,” said Mr Bonnar. “SuperLife also achieved five stars in the balanced and growth profiles for the third year running. Other organisations to achieve a five-star rating for outstanding value in various profiles are AMP, BNZ, TOWER and Medical Assurance Society. We congratulate all the five-star winners of the CANSTAR KiwiSaver star ratings on providing outstanding value for money to targeted New Zealanders.
The full KiwiSaver star ratings report can be downloaded on http://www.canstar.co.nz/
CANSTAR provides Australia and New Zealand's only fully interactive online research service in retail and business finance.
Founded in 1992, CANSTAR Pty Limited (formerly CANNEX) is Australia and New Zealand's premier researcher of retail finance information for over 250 institutions such as Banks, Building Societies, Credit Unions, Finance Companies, Brokers, Mortgage Originators, Life Companies and finance related Internet Portals.
CANSTAR customers use the extensive database for competitor analysis as well as a means of disseminating their product range. CANSTAR also distributes this information to print and electronic media for publication and to Agents, Accountants, Brokers and Internet Portals for use in advising their clients.
What are the CANSTAR
CANSTAR researches, compares and rates the suite of banking products listed below. Results are freely available to consumers who use the star ratings as a guide to product excellence. The use of similar star ratings logos also builds consumer recognition of quality products across all categories. Please access the CANSTAR website at www.canstar.co.nz if you would like to view the latest star ratings reports of interest.