From next month, KiwiSaver customers will be able to see the amount they are paying in fees
KiwiSaver customers from April 1 will be able to see the fees they pay their fund managers in dollar figures instead of percentages for the first time.
The change to dollar figures is a result of work by the Commission for Financial Capability (CFFC), the Ministry of Business, Innovation and Employment (MBIE) and the Financial Markets Authority (FMA) to improve reporting transparency for KiwiSaver members.
The requirement comes into effect next month and consumers will see the dollar figure on the next statement they receive sometime in the next two months.
For example, if a customer has a balance of $10,000 in their KiwiSaver account, until now they might have seen the fund manager’s fee expressed as 1.28%. That will now be spelled out as $128 per year. According to the KiwiSaver Fund Finder tool on the Sorted website, total fees on $10,000 in a balanced fund range from $52 to $174 per year.
FMA director of regulation Liam Mason said he hoped the transparency on fees would point out the variation between KiwiSaver providers’ fees.
“We hope people pay attention to their statements this year when they find out what they are paying. This should be a good prompt to find out more about your KiwiSaver fund and to use the tools available and check what you are paying for.
“The difference in fees may be due to the type of fund you are in – conservative funds tend to have lower fees than growth or aggressive funds – or it may be due to the fund manager providing a different range of services,” Mason added.
The FMA’s KiwiSaver Tracker tool shows the percentage chunk that fees take out of your returns.
CFFC’s education group manager David Boyle cautions against changing funds or providers solely because of on their fee level. The KiwiSaver Fund Finder tool enables members to compare like for like by way of fund type, returns after fees and the range of services fund managers provide, which may include advice.
“Some fund managers charge more, but you get a better return overall,” Boyle added.
“After using our online tools, the most important factor to take into account is the total return after fees.”
Boyle says that when customers received their next statement it was a good time to review their KiwiSaver position:
- Check that you are contributing regularly.
- Make sure you’re in the right fund for your stage in life and comfort with risk – your long-term returns depend largely on where your funds are invested.
- If eligible, make sure you’re getting the member tax credit (MTC) of upto $521 a year from goverment, and check your PIR tax rate to make sure you’re not paying too much tax.
Both the CFFC and the FMA suggest customers concerned with how much they are paying in fees contact their provider and ask what services they are receiving, and how their money is being managed.
