KiwiSaver is the most popular form of saving in New Zealand and it offers many great benefits, so if you’re not already KiwiSaving… you really should start!
When it comes to choosing your KiwiSaver fund there are a range of different things you should consider and compare to make a fully informed choice. Many people focus on KiwiSaver Fees and whilst they are an important point to consider investing decisions should not be based solely on fees but they should be part of the wider conversation.
Now, there are a number of low fee and fee-free KiwiSaver providers to compare and consider but it is important to remember that fees only make up a part of your funds overall performance and what you are looking for it the best performing KiwiSaver for your situation. Just because a KiwiSaver fund has delivered good results in the past it dows not mean it will continue to in the future and so it is important to compare KiwiSaver providers by past performance, KiwiSaver fees, fee structures and more. It is also important to keep an eye on your KiwiSaver regularly as KiwiSaver providers may change the fee structures or fee types at any time.
So, the ideal solution is finding a cracking KiwiSaver fund with zero or low fees… good luck! LOL! But in all seriousness, that is where Money Compare and our partners at National Capital can help you find the best KiwiSaver product for you, but it’s always good to start those sort of conversations with some information on the type of KiwSaver you are loking for and the sort of fees that different KiwiSaver providers charge.
What are KiwiSaver fees and are there different types?
In short, there are a range of different KiwiSaver fees. Some you can avoid and some that you can keep as low as possible. So what are the different types of KiwiSaver fees?
KiwiSaver Administrative fee – This is usually a fixed fee and it generally ranges from $zero to $50 per year. Now $50 a year doesn’t sound like much in itself BUT if you think about it over the lifetime of your KiwiSaver it can, at times be a significant amount. For example, when you first start paying into a KiwiSaver your balance is low, say you have $5000 in your KiwiSaver fund, and your return is $150. Subtracting $50 from that return in the form of a KiwiSaver administration fee makes a big chunk… but as your fund balance grows as you continue to invest the returns will be bigger. Say you then have close to $100,000 saved; your likely return will be more like $5,000 and then a $50 fee doesn’t seem quite so extreme.
KiwiSaver Management fee
This is paid based on a percentage of your investment fund account balance and usually ranges between 0.30% - 3.25%
Your KiwiSaver fund provider also needs to make some money and they use their expertise in investment to get paid by taking a small commission from your investment fund. The KiwiSaver management fee varies by fund and provider and so this is another reason why you need to compare KiwiSaver finds. The management fee is different to each provider, and the fee often varies within the funds that a provider manages as well. For example, higher risk, more changeable and active funds will generally charge a higher fee as they literally require more work at the provider ed to manage than a conservative, low-risk fund that needs less active management.
KiwiSaver Performance fee
A percentage fee based on your account balance
This is a fee that your KiwiSaver fund provider charges when they have successfully overseen a fund that performs above the expected returns. Not all KiwiSaver fund providers charge performance fees and they are usually only associated with more aggressive funds, like KiwiSaver growth funds.
Why do KiwiSaver fees vary so much?
Well, put simply KiwiSaver funds differ hugely. There are a vast number of different variables in each fund and provider and this is one f the main reasons that KiwiSaver fund providers fees change and an important reason why you should compare KiwiSaver funds. One of the main reasons for the differences in KiwiSaver provider fees is the type of service and reporting that they offer. This could include things like whether the provider regularly reviews your fund or how often they check in with you to ensure your circumstances or saving goals haven’t changed.
Some people setting up a KiwiSaver fund will be doing so to save for a deposit on their first home (one of the reasons you can withdraw KiwiSaver), whilst others will be looking longer term to save up and invest for retirement. It is always worth thinking WHY you are saving to ensure you’re in the most suitable type of KiwiSaver fund.
Keep your wits about you… Low Fees don’t always MEAN low fees…
It always pays to compare and none more so than when looking at KiwiSaver fees. Some of the promotion and marketing methods deployed by the KiwiSaver find providers showcase the fees in an ‘inconsistent’ way. One common trick is to highlight one fee as being low, whilst not mentioning another fee in the main advert. This is also common with ‘free credit’ offers for electronics etc that actually end up with annual fees, set up fees and so on… so make sure the KiwiSaver fees you are comparing include ALL the fees.
A quick example of what we mean: Pretend your KiwiSaver has grown to $10,000 with your KiwiSaver fund provider who advertises they have a competitive annual fee of just 0.30%. This fee is JUST the management fee and doesn’t include the administration fee they also charge. Say that fee was another $25, and all of a sudden, what you thought was 0.30% is actually pushed up to 0.55% - that’s a big difference and reflects the KiwiSaver fees you’re actually paying. So buyer beware! Read the small print, or get expert KiwiSaver advice. Why? Because KiwiSaver is BIG business for the fund managers and in 2019 New Zealand investors paid more than $80 million in admin fees... so make sure you’re comparing your KiwiSaver fees alongside forecasted performance.
How to compare KiwiSaver fees and compare KiwiSaver fund performance
The classic line here is that past performance is not a prediction of future performance and you should always be aware that your investment may go down in value as well as up… but that only matters if you are looking to withdraw.
Generally the advertised returns that KiwiSaver funds have achieved in the past are figures that have had the fees subtracted, but it is still imprtnat to dig into the detail as those fees could be very large if fund performance drops.
If you already have a KiwiSaver you should dig out your paperwork and look at the small print in what is called the Product Disclosure Statement (PDS). If you can’t find this contact your provider and they will give it to you. Alternatively, have an expert do the hard work for you. Here at Money Compae, we have partnerd with National Capital, KiwiSaver advice specialists. They will help you review your KiwiSaver, free of charge, and compare your KiwiSaver fund with the rest of the market. They will take time to understand your investing goals and ensure that the KiwiSaver you have selected is the best product for your needs.
It only takes a few minutes to conduct a KiwiSaver healthcheck and it is a free to use service so why wouldn’t you? Compare your KiwiSaver performance now and ensure you are in a positon to maximise your value for money and returns.
Optimising your KiwiSaver with Money Compare and National Capital is one of the simplest things you can do to maximise your investment and make your money work harder for you.