New KiwiSaver provider goes on attack over fees
New KiwiSaver provider Simplicity is taking on its competitors in aggressive fashion.
It has launched a new calculator on its website, which allows members of other KiwiSaver schemes to check how much they are paying in fees.
"Many KiwiSaver managers obscure the fees they charge, leaving their members thinking the only cost they pay is an annual membership or administration fee. That's often less than 20 per cent of the real cost," Simplicity founder Sam Stubbs said.
Simplicity is a low-fee, passive investment offer.
The Government recently introduced regulations requiring KiwiSaver providers to disclose fees in dollars and cents. They can opt to do so immediately but 16 of the 26 have opted to wait until they have to, next year. They were given the year to transition when some raised concerns about needing to make IT changes.
Stubbs said that was disappointing.
"They have actively chosen to continue to bury their management fees in the fund returns."
He said some would disclose an annual member fee, of $30 or so, but not show the management fees charged. "It's obfuscation at best and hiding fees at worst. If you look at other industries, no one else does it. Even your rates bill, which is a percentage of the value of your property, even your rates bill still tells you in dollars and sense. We thought that's not right. If they aren't going to choose to tell their members, we will."
He said the most expensive fund was seven-and-a-half times the cheapest. "There are no other goods or services I know of where one provider is seven-and-a-half times as expensive as another. The only reason they get away with it is because they're members don't know."
He estimated $480 million in fees would be charged this year. "With numbers that high you can imagine they don't want their members to know."
But David Beattie, of Booster, said Simplicity was putting too much emphasis on fees. He said it was dangerous to suggest that KiwiSaver was a commodity where price was the biggest deciding factor. "It's not like comparing utilities bills across power companies but that's often the comparison that Simplicity will make."
He said different KiwiSaver providers would have different value propositions – Booster gives members access to financial advice. "It's frustrating to see such a huge emphasis on fees. They are important but the marketplace will naturally take care of that."
He said the onus was on providers to show how they were adding value for their members.
Ana-Marie Lockyer, head of wealth products at ANZ, the country's biggest KiwiSaver provider, said it was the return after fees that should matter to investors.
"Even a 1 per cent difference in investment performance in your KiwiSaver fund over time could give you an additional $100,000 when you retire.
"It is very dangerous for members to look at one lever like fees alone, particularly when other levers may have a greater influence on retirement savings outcomes, which remains the purpose of KiwiSaver. So members should consider what is most important to them when making decisions around their KiwiSaver," she said.
"It is also worth remembering that KiwiSaver is really in its infancy when compared with many overseas pension schemes - the benefits of scale are still to come, although note that members are already benefitting from scale savings being passed through to them from providers."