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Fund managers pull in $40 million in fees since January 1st

While New Zealanders were on holidays in January, KiwiSaver fund managers charged more than $40 million in fees and will likely charge more than $525 million by end of the year.

To highlight how much KiwiSaver members are paying in fees, Simplicity launched a new online fees clock, modelled on the US Debt Clock in New York.

The fees clock (viewable here shows that KiwiSaver members together are paying over $1,000 per minute and $60,000 per hour, 24 hours a day.

Simplicity’s Managing Director, Sam Stubbs says KiwiSaver members need to understand the enormity of the fees they’re paying, in a way that’s easily understood.

“KiwiSaver fees are the largest household expense people have never heard of. Over their lifetime, an average KiwiSaver member will pay $54,700 in fees, way more than they will spend on power or their mobile phones,” he said.

This year KiwiSaver suppliers will have to disclose their total KiwiSaver fees in dollars and cents for the first time.

“2018 is going to be a huge wake up for KiwiSaver members, who’ve been kept in the dark,” said Mr Stubbs.

“When members finally understand what they’re actually paying in fees this year, they could be shocked. Many still assume they only pay an annual administration fee of $20-$30 because management fees (which are often higher) are not disclosed in a manner that people can understand.”

Mr Stubbs was critical of large providers who said that KiwiSaver was only just gaining enough scale for them to consider dropping fees.

“Most of the biggest providers still have management fees 2-3 times as much as Simplicity’s for comparable funds. They had economies of scale years ago, they’re just addicted to the profits they make from KiwiSaver.”

Simplicity reached break even this month after only 15 months in operation and is already saving its KiwiSaver and investment fund members an average of $330 per year in fees.

It charges $30 a year, plus a management fee of 0.31% a year for all it’s funds. This is substantially lower than all competitors, and all default KiwiSaver funds.

KiwiSaver funds under management topped more than $43.2 billion in September last year and by 2030 are expected to reach $200 billion.

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