04 June 2018

    KiwiSaver account fees explained

    An overview of KiwiSaver fees covering the different types and why they can vary by fund and provider


    Your annual KiwiSaver statement is going to look a little different this year. As of 1 April 2018, your KiwiSaver management fee and performance fee will be displayed in dollar figures, as well as percentages.

    Previously, these fees have been expressed solely as percentages on your KiwiSaver statement, which makes it easy to compare different funds and schemes. Showing these amounts in dollars and cents can help you understand the fees' impact in terms of real money, so you'll know exactly how much you are paying for the management of your account.

    Read on to learn more about your KiwiSaver account fees and ensure you're investing your money in the right way for you.

    What fees do I pay on my KiwiSaver account?

    There are two types of KiwiSaver account fees.

    1. Account feesThis is a fixed, flat membership fee that pays for the general administration of your account by your KiwiSaver provider. Account fees can be anything between $0 to $60 per year, according to the Commission for Financial Capability's (CFFC) KiwiSaver Fund Finder site.

    2. Percentage feesA percentage of the value of your balance is charged by the KiwiSaver provider to cover a number of services related to your investment. These fees include the costs associated with servicing your account, such as accounting, unit pricing and auditing. They also cover fees charged by the Supervisor, and the services provided by Fisher Funds, such as investment management, client service, financial advice, guidance and tools.

    Percentage fees are accrued on a daily basis and are reflected in the unit price of the funds — in other words, the value of the funds. They vary depending on which fund you're in, but the average across all KiwiSaver schemes is 1.22%, according to the CFFC. 

    Both of these fees are now being shown as dollar figures on your KiwiSaver annual statement.

    What do these fees pay for, exactly?

    KiwiSaver fees cover management costs such as paying investment managers for their expertise and decision making to invest and grow your money, services you receive as a client, and running costs. It makes sense, then, that for higher servicing to your account, you pay higher fees.

    For example, when you select a more actively managed fund, you will have a team of investment professionals who are carefully selecting and constantly monitoring the companies and assets they invest in. They're also looking for new opportunities, aiming to always get you the best investment possible.

    In what are commonly called passive funds, they practice passive investing, buying shares and then allowing your money to follow the market index. Therefore, they can charge lower fees for a lower level of management.

    Do fees vary by fund, or by provider?

    Both. Some KiwiSaver providers practice active investment management, and others practice passive investment management, and providers often have more than one fund with varying fees on each fund.

    At Fisher Funds, we are an active fund manager, which means our investment approach is hands on and straight forward, with the objective of achieving your investment goals. We rely on our own first-hand research, trust our instincts and benefit from our years of experience in order to create the very best investment portfolios to benefit our clients. As an active manager, we have the ability to control our portfolios, choosing what we do and don't invest in and making changes as we see fit. Over time, we have demonstrated that we can deliver investment returns over and above the market.

    On the other hand, providers that offer passive fund management simply buy and sell shares according to the companies' current weighting in the market index, without seeking to 'beat' the market. Their investments follow the rise and fall of the market index.

    Even within the same provider, fees usually vary depending on the type of fund you're in. For example, growth-oriented funds tend to have higher fees, whereas balanced and conservative funds typically have lower fees.

    What do I get from my Fisher Funds fee?

    1. Active investment management

      • A team of real people based in New Zealand with a combined 250+ years of experience looking out for the best investment opportunities for you.

      • Proactive investing: The ability to move your investments based on market factors, global events and trends, capitalising on times of market volatility as well as positioning portfolios more defensively when appropriate.

      • Responsible investing: We do our homework to ensure we're investing your money in genuinely good businesses — those that are respectable corporate citizens and those in which we would feel comfortable investing our own money.

    2. Extra services

      • Financial advice (For example, how to transfer your Australian super, how to use your KiwiSaver to buy a first home, etc.)

      • Total transparency of, and access to, your investments

      • Consultations on retirement and investment decisions

      • Information on topics such as maximising your member tax credits

    Should I choose a fund with the lowest fees?

    In our view, the short answer is "no". If you want to grow your money, focussing solely on the fund with the lowest fees is not necessarily the fastest way to get there. For example, while our growth fund has a higher fee than our conservative fund, the growth fund has had an higher average annual return after fees over the last ten years. There are lots of other factors to consider — read more about them here. Ultimately, we recommend that you ensure your fund matches your personal circumstances and goals, and contribute as much as you can afford to so you can benefit from compounding returns. Look at the results and services you're getting after the fees to determine the real value. If you're unsure about which fund is right for you, our range of tools and calculators can help. Above all, remember that fees are only one part of the investment puzzle — returns and service are just as important.